How a growing economy in 80s is going to crash now? “Story of Pakistan”

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Unprecedented social and political unrest, economic stagnation, and growing poverty have all plagued Pakistan for the past ten years. Asia, which has emerged as the region with the fastest growth worldwide, is the only place where things have stagnated. Pakistan experienced “lost decade” throughout the 1990s. Over the past ten years, growth rates of 5% have been achieved in Bangladesh and Nepal as well.

The political economy of Pakistan during the past three decades could provide some insight. The dependent industrialization that has long been a hallmark of Pakistani economic policy is at the basis of the difficulty the country’s economy experienced in the 1990s. The possibility for an independent and sustainable growth strategy was damaged by the tight ties developed with Western nations, particularly the United States, and the benefits of this special relationship.

The Pakistani economy continually grew at high rates during the 1980s, whilst India was stuck with its “Hindu pace of growth.” Early in the 1990s, Pakistan had a per capita income of USD 500, which was almost 25% greater than India’s USD 390. The typical Pakistani was (and is) better off in terms of food and clothing and exhibited remarkable growth rates throughout time. Early in the 1990s, Pakistan had a per capita income of USD 500, which was almost 25% greater than India’s USD 390. Pakistanis were (and still are) better fed and clothed than Indians on average. In 1992, only 11 percent of Pakistanis lived in poverty, compared to 52 percent of Indians who made it on less than a dollar a day. With its far bigger population, India has the same number of migrant labourers in West Asia as Pakistan, which has about two million. What, therefore, is the root of the crisis that has compelled Pakistan to grovel before the IMF not once, not twice, but three times in the past ten years?

Numerous commentators have remarked that Gen Zia-ul Haq and Zulfikar Ali Bhutto’s respective legacies have had a significant impact on Pakistan’s politics and economics. Bhutto’s populism was that of an elected official who wanted to build a powerful and resurgent Pakistan. His focus was on industrialization and mass production, followed by a programme to create the atomic weapon. This was done in order to reverse the military setback of 1971 and neutralise Indian predominance on the Subcontinent. The focus Bhutto placed on “socialism” and a robust public sector helped to reshape Pakistan’s political economy in previously untried ways.

To gain a deeper understanding of Pakistan’s political economy, it is important to trace its journey from Bhutto’s economic policies, to the Zia regime, which made the country increasingly dependent on foreign savings, to the crises of the 1990s and pressure from the IMF. am. , the so-called democratic regime sought to impose an unprecedented burden on the Pakistani people in an era of declining foreign aid and remittances. The exacerbation of the crisis after the 1998 nuclear detonation must also be considered. Finally, the policies of General Musharraf and his Finance Minister Shaukat Aziz must be put to the test, unhindered by the pressures facing democratic regimes. The nationalization of private banks, insurance companies, and large corporations faced fewer obstacles. In the first phase, Bhutto targeted basic industries, nationalizing 31 industrial units producing capital and intermediate goods. These create about 20% of the added value in large-scale industries. Most private sectors that produce consumer goods were unaffected.

By the end of 1973, further nationalization undermined the atmosphere of cooperation. Many small and medium-sized units were also taken over by the country. Some observers, such as Omar Noman, have argued that this was not the result of an explicit, systematic strategy of increasing state control over the economy, but rather an ad hoc response to a short-term crisis. I’m here. In 1973, the government nationalized the cooking oil industry when floods and panic buying tripled the price of cooking oil. In 1976 he nationalized the mills, cotton gins and hullers, and opposed the small, rural petty bourgeoisie. Confidence in the private sector reached new lows, undermining Bhutto’s corporatist state intervention strategy.

By 1977, the Bhutto regime had alienated itself from all three classes of economic power: the bureaucracy, the rising bourgeoisie, and the landlords. The latter especially suffered from nationalization of the agro-processing industries in which they had invested, such as cotton ginning, hulling and milling. His PPP supporters in the lower classes were also marginalized after the purge of left-wing elements and his gradual shift to the right under the World Bank programme. Conflicts with the military-backed opposition led to a military takeover in 1977. When Pakistan exploded a nuclear bomb in 1998, its trade and balance of payments were in disarray. Workers’ remittances have stagnated around the $1 billion mark and the current account deficit was $2.5 billion. As the Western countries imposed sanctions on Pakistan and the IMF cut off its assistance, the crises in the balance of payments deepened. The government of Nawaz Sharif faced difficult choices. As depositors tried to withdraw deposits from the foreign currency accounts, the government hit the panic bottom and froze these accounts. This single act of the government undermined its credibility and accentuated the capital flight from Pakistan.

According to the West, “aid” is now flowing to Pakistan again. The IMF approved her $300 million short-term loan and the Pakistan Relief Consortium rescheduled $28 billion of Pakistan’s debt. Furthermore, “aid” from the Asian Development Bank, the World Bank, and the Japanese and US governments has resumed. Pakistan will likely be able to ease its balance of payments and resume imports later this year to boost growth.

Well, Attracting domestic and foreign private investment and curbing capital flight depends largely on restoring trust in the government. The military government is trying to pass a law outlawing future confiscation of foreign currency accounts. However, previous governments have not hesitated to ignore such restrictions. Without a full restoration of parliamentary democracy, an end to the militarization of society and a reduction in military spending, Pakistan is unlikely to resolve its economic crisis.