As of early 1994, foreign tourism remained relatively undeveloped. Annual tourist arrivals averaged 442,136 for the period 1985-89 but fell to 284,779 in 1990 because of uncertainties generated from the Persian Gulf War. The number of tourist arrivals rose to 415,529 in 1991. Many of the arrivals are visitors of Pakistani origin who have settled in Europe and North America. Pakistan has considerable tourist potential, but the generally poor law and order situation in the late 1980s and early 1990s discouraged rapid growth. Hotels meeting international standards are concentrated in the larger cities, especially Islamabad, Karachi, Lahore, Peshawar, and Rawalpindi.
In early 1994, the immediate future of the economy appeared uncertain. Although the economy is responding well to the government's liberalization program, and many sectors appear poised to achieve healthy rates of growth, economic prospects are constrained by the government's large budget deficits, the continued absorption of public expenditures by defense and interest payments, and the perception of widespread corruption. Pakistan remains heavily dependent on foreign aid donors. The failure to address more adequately the nation's low levels of education and health is also likely to act as a constraint on economic growth in the remainder of the 1990s.
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