Guidance

Overseas business risk: Pakistan

Updated 7 August 2023

This report provides key information on security and political risks that UK businesses may face when operating in Pakistan.

Political

Former Prime Minister Imran Khan of the Pakistan Tehreek-e-Insaf (PTI) party was elected in 2018 but removed from office following a no confidence motion in April 2022. Following this, National Assembly members elected former opposition leader Shehbaz Sharif of the Pakistan Muslim League - Nawaz (PML-N) as Prime Minister. The PML-N are joined in coalition with the Pakistan People’s Party (PPP) and a number of smaller parties, together forming a majority under the banner of the Pakistan Democratic Movement (PDM). The current government’s five-year term is due to expire in August 2023 after which a caretaker government with limited powers will take charge until elections are held. Elections are due in October or November 2023. Political turbulence remains a feature of Pakistan’s democracy.

Pakistan has 1 federal administrative territory (Islamabad Capital Territory), 4 provinces (Punjab, Sindh, Khyber Pakhtunkhwa, and Balochistan), and 2 administrative regions in Pakistan-administered Kashmir (Azad Jammu & Kashmir and Gilgit-Baltistan).

Pakistan is a parliamentary democracy with a bicameral parliament at the federal level (the National Assembly and Senate) and unicameral parliaments at provincial level (the Provincial Assemblies of Punjab, Sindh, Khyber-Pakhtunkhwa, and Balochistan). The federal and provincial governments are cabinet-style, with mostly elected ministers and some appointed advisers managing government departments, led by a Prime Minister (nationally) or Chief Minister (provincially).

Under the 18th Amendment to the Constitution of Pakistan, passed in 2010, the provinces were granted significant autonomy. Budget allocations between the federal centre and provinces are decided via the National Finance Commission award. The President is a mostly ceremonial Head of State, as are provincial governors. The military plays a large role in strategic decisions in Pakistan.

 Economic

Pakistan is undergoing a period of economic instability with limited GDP growth and high inflation. From January 2022 to June 2023, the value of the Pakistan Rupee (PKR) depreciated over 62% against the US Dollar. However, the IMF’s $3 billion 9-month Stand-By Arrangement (SBA) has helped unlock critical external financing, leading to an increase in Pakistan Foreign Exchange Reserves to above $8 billion in mid-July 2023. The removal of import restrictions and authorities allowing the market to determine the exchange rate are further welcome steps.

The fiscal deficit during July 2022 to June 2023 was at 7.6%^{[footnote 1]} of GDP requiring Pakistan to introduce additional revenue raising measures in the federal budget 2023 to 2024 and curtailing expenditures to reduce the burden on borrowing to finance fiscal operations. The central bank has increased the interest rate to a record high of 22% to arrest the increase in high inflation (recorded at 30% at end June 2023).^{[footnote 2]} Pakistan’s external debt is approximately $100 billion with approximately $25 billion external debt repayment due between July 2023 and June 2024.

Pakistan’s $3 billion SBA provides an opportunity to achieve economic stability, and with the right reforms may help maintain debt sustainability in the medium term. In the long run if Pakistan is to improve its economic outlook a follow-on long-term IMF programme is likely to be required post-elections. Remaining within the IMF programme and implementing much needed economic reforms will help Pakistan improve its credit ratings, allow better access to international capital markets and boost investor confidence.

Pakistan is ranked in top 10 most vulnerable countries at risk to climate change and natural disasters. In 2022, floods in Pakistan were estimated to have resulted in $15.2 billion in direct economic losses, and an additional $14.9 billion in damage.

3. Business and human rights

In 2021, Pakistan published its inaugural National Action Plan on Business and Human Rights (2021 to 2026) (PDF, 648 KB).

There remains serious human rights concerns and violations in Pakistan, including restrictions on civic space and freedom of expression, intolerance and direct and open discrimination towards some minorities, prevalence of bonded and child labour and failure to uphold the rights of women and children.

Civic space and freedom of expression face growing restrictions, including temporary bans on social media and mobile network blackouts. Pakistan ranked 150/180 countries in the Reporter’s Without Borders 2023 World Press Freedom Index. Critics of the authorities face increasing difficulties in expressing their opinions, including through social media. The legal regime regulating local and international non-governmental organisations (NGOs) remains opaque.

Pakistan retains the death penalty for approximately 27 offences. Pakistan reportedly has almost 4,000 individuals on death row in October 2021, amounting to 15% of the world’s death row population. In 2020, an informal moratorium was instated on executions, which remains in place as of July 2023.

Reports of enforced disappearances of human rights defenders, journalists, and others continue. Credible allegations of torture and mistreatment also continue, despite the passing of the Torture and Custodial Death (Prevention and Punishment Act) in November 2022.

Blasphemy is illegal and has a broad definition in Pakistani law. It includes public and private comments in any form, including on social media. The state enforces blasphemy laws and there are significant criminal penalties up to and including the death penalty. The use and misuse of the blasphemy laws remains a concern. Those accused of blasphemy are at serious risk of violence from members of the public. Both Muslims and religious minorities have been victims of blasphemy accusations and violence, including killings.

Harassment, discrimination and violence against women and girls remains widespread. Pakistan ranked 142/146 countries in the World Economic Forum 2023 Gender Gap Index. According to the 2022 report, around 25% of women are in the labour force, compared to 85% of men.

Pakistan is an FCDO priority country for Human Rights. References to Pakistan are included in the FCDO’s Human Rights and Democracy Report 2022.

 Bribery and corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world. In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case, it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

Corruption in Pakistan takes many forms ranging from petty bribery to nepotism and misuse of power. Individuals may face demands for petty bribes even to access basic services. In parts of Pakistan, there are reports of widespread corruption among service providers. New businesses may be invited to contribute a ‘facilitation fee’ to avoid an uncomfortably long wait for telephone lines and similar facilities. There is also corruption in the public sector, including procurement, taxation and public finance.

In 2022, Pakistan was ranked 140 out of 180 in Transparency International’s Corruption Perception Index (CPI) (PDF, 9.4 MB).

Visit the Risk & Compliance portal for advice and guidance about corruption in Pakistan and some effective procedures you can establish to protect your company from them. See our anti-bribery policy and bribery and corruption in trade page.

Terrorism

Terrorists are very likely to try to carry out attacks in Pakistan. There is a high threat of terrorism, kidnap and sectarian violence throughout the country, including the major cities of Islamabad, Rawalpindi, Lahore and Karachi. Foreigners, in particular westerners, may be directly targeted. You should try to avoid all crowds and public events including political gatherings and religious events throughout Pakistan, and take appropriate security precautions. See our FCDO Travel Advice for further information.

 Protective Security Advice

UK companies wishing to do business in Pakistan are advised to familiarise themselves with UK Travel Advice for Pakistan which includes information on Safety and Security and reducing the risk from terrorism while abroad.

The Centre for the Protection of National Infrastructure also provides protective security advice to businesses

Intellectual Property

A wide range of counterfeit goods from other countries, including China, find their way to Pakistani markets. Counterfeit products are also produced domestically. The trade encompasses software, pharmaceuticals, cosmetics, books, branded clothing and a wide range of other consumer goods. UK companies and business residents in Pakistan are most likely to come across counterfeit pharmaceuticals, which according to the World Health Organisation account for an estimated 50% of all medicines sold locally. Retailers make little effort to disguise the fact that they sell counterfeit goods; one way of telling is that the packaging is sub-standard, but this is not always the case.

There is inadequate protection of companies from Intellectual Property Rights (IPR) violations. Nor is there any clear legislation that covers IPR. However, awareness of IPR is increasing in Pakistan.

The Intellectual Property Organisation of Pakistan (IPO-Pakistan) is the body responsible for operating the patent, industrial design, trade mark and copyright system in Pakistan. IPO-Pakistan provides detailed guidelines and FAQs for trade mark applications on their website. Read the information provided on our Intellectual Property page.

Organised crime

Organised crime in Pakistan includes smuggling, drug trafficking, money laundering, extortion, fraud, land scams, criminal gang rivalries and political violence.

Smuggling is prevalent in Pakistan, partially enabled by Pakistan’s shared borders with Afghanistan, Iran, China and India, and close proximity to the Gulf. The smuggling of consumer goods for resale in Pakistan or onward transit is a major industry. Such smuggling is unlikely to affect the daily operations of most UK companies, but may occasionally lead to tensions and conflict.

Money laundering is also common in Pakistan. As of July 2023, the cash limit for money being taken out of the country is $5,000. Use of the “Hawala” system instead of legitimate remittance corridors is also common to launder money in and out of Pakistan.

There is a threat of kidnapping throughout Pakistan. Both terrorists and criminal groups are involved in hostage taking. If you are working or travelling in Pakistan, you should be alert to the threat of kidnap targeting Westerners, including British nationals. British nationals of Pakistani origin are at particular risk of kidnap for ransom. The long-standing policy of the UK government is not to make concessions to hostage takers. The UK government considers that paying ransoms and releasing prisoners builds the capability of terrorist groups and finances their activities. This can, in turn, increase the risk of further hostage taking. The Terrorism Act (2000) makes payments to terrorists illegal.

Drug trafficking via air, sea and land to Europe, North America, Africa and the Far East, particularly in the form of parcels, couriers, dhows and shipping containers, is a major business despite the internationally assisted efforts of the Pakistani authorities.

Illegal migration is a problem in Pakistan. This mainly includes migrants from Afghanistan travelling into Pakistan, and then onward either by air or land routes through Iran towards Europe and the UK.

 Disputed territory

British companies considering projects in disputed territory in Kashmir are advised to contact the nearest British High Commission in India or Pakistan or the Department for Business and Trade in London before proceeding. The UK government can offer advice on regional sensitivities and the potential commercial and reputational risks of operating there.

The decision as to whether or not to engage in commercial projects overseas ultimately lies with the companies concerned, following their own risk assessments and the advice of their lawyers, should they seek it. The UK government does not provide legal advice to private companies and individuals in relation to their commercial activities. Companies considering operating in either Pakistan or India should also consider the advice in FCDO Travel Advice.

 Contact us

Contact the Department for Business and Trade (DBT) team in Pakistan for more information and advice on opportunities for doing business in Pakistan.

1. https://www.finance.gov.pk/survey/chapters_23/Highlights.pdf (PDF, 4.3 MB) ↩

2. https://www.sbp.org.pk/m_policy/2023/MPS-Jun-2023-Eng.pdf (PDF, 200 KB) ↩