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Tuesday, May 21, 2024

Pakistan Economy: History and Required Reforms 

The Covid19 peak in Pakistan has passed and it is the need of the hour that all reforms must be implemented in letter and spirit by the government without paying any heed to the opposers of the change.

The Pakistan economy faced a plethora of challenges from the beginning. Various economic, political and social challenges rose like a Hydra with multiple heads. pakistan economy  
We delayed constitution-making process to 9 years while India passed its first constitution within three years of its creation. We continued under the 1935 India Act that was never meant to govern a democracy.
Moreover, Karachi, the first capital, was a tent-city with little resources to run a newborn country. Out of 3300 bureaucrats of the subcontinent, only 130 chose Pakistan. Our economic hurdles were further aggravated by India when our due share of assets was delayed.

Political leadership after Jinnah 

Politically, Muslim league failed to transform itself from a movement to a political party. Political leadership after Jinnah lacked any charisma and were entangled in their internal party disputes which opened way for bureaucracy and military to rule. Just like today, incompetent leadership moved the politicians to the backseat.
However Ayub Khan moved the country in a right direction at an appropriate speed. But the misadventure of Gibraltar halted it momentarily. Rapid industrialization and capitalism took place in West Pakistan that led to creation of famous 22-families syndrome. The grievances of East Pakistan against the Punjabi ruling class were left unheard which led to the Bangladesh debacle. Majority won independence from a minority. Two nation theory was again at work but with an economic dimension for one more time.

Economy of a young Pakistan

The economic indicators of 1960 and 1970 available at World Banks website portray a very unique picture. Pakistan was leading in exports that time. Turkey, India, China and Malaysia were far behind but then we took a wrong turn. The Nationalization policy of 1970 by the then PM Zulfiqar Ali Bhutto threw us under the bus. All countries previously mentioned opened up their countries to reforms and investments while we closed the doors on everyone.
We suffered heavily and Pakistan’s industry was destroyed. Our economic growth was at the lowest ebb. Meanwhile, China under Deng and India under Gandhi-Nehru focused on robust reforms in economy and governance, we had all our energies focused to Soviet War and Islamization of the government. South Asia and China focused on robust reforms in every department from 1970s to 2000 that transformed their economies and decreased poverty. Social indicators were on rise.
However, in Pakistan we were on a wrong bus. We first nationalized the bus, then we hanged its driver and instead of shifting to a new bus we bought a tank to ride on!

Pakistan’s economy: Mismanagement continued 

The Junejo regime focused on reviving the Economy but we were crushed by the burden of our “nuclearization” policy. We were spending the highest of our GDP on defense. We spent 9.5 percent of GDP on defense, highest to date, while spending only 0.5 percent on social sector. The social indicators nose-dived and Pakistan was left far behind in South Asia in social development. Benazir Bhutto in 1990s was elected twice as PM but she failed to introduce any reforms in the country.
Nawaz sharif tried to set the country in right direction by denationalizing major sectors but was interrupted twice by his own created political imbroglio. Nuclear testing in 1998 again shifted our focus to defense and we faced a number of economic restraints by the world.
Shaukat Aziz created a macroeconomic stability in the country and economy boomed. Devolution of power to local governments improved the social indicators as well. Musharaf created a Reforms commission in 2007 that suggested a large number of reforms in judiciary, FBR, police and bureaucracy.

Ishrat Hussain’s advocacy

Ishrat Hussain suggested the privatization of all loss-incurring entities like PIA, WAPDA and railway etc. He advocated for agriculture-tax. He suggested the widening of tax net through multiple interventions at various levels. District civil service was to be introduced at districts level. However Musharraf’s misadventure with the judiciary and the new regime of PPP under Zardari led to a halt in implementation of these reforms.
But Ishart Hussain didn’t lose hope and started introducing these reforms under Imran Khans Government. He initially faced immense pressure from the traders who resisted the documentation of their trade. But reforms in the other departments were under process in initial stages when Covid19 disrupted the economy.

Need for reforms in Pakistan economy 

Now, The Covid19 peak in Pakistan has passed and it is the need of the hour that all reforms must be implemented in letter and spirit by the government without paying any heed to the opposers of the change. The cartels need to be dismantled if we want to progress and stand in the queue of developed nations. Without reforms we will be again on one-step-forward-and-two-steps-backward approach.

The writer is a doctor and a blogger. He studied public policy at the University of Massachusetts, Amherst and attended India Institute of Science in Bangalore. The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.