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Economic history of Pakistan.

ECONOMIC HISTORY of Pakistan.

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Economic history of Pakistan.

  1. 1. ` ECONOMIC HISTORY The only suitable manner in which a country can be evaluated is to examine its history and to look at how certain features have evolved through certain processes and the direction in which these developments have taken place. The story of development is more important than a mere comparison of numbers at the beginning with those at end. Probably the most striking factor that is in a manifested in a view of Pakistan in 2013 as compared to 1947 is that Pakistan today is less than half of country it was in 1947.in 1947 55% of Pakistan’s population lived in what was then east Pakistan making it the majority province in terms of population. Despite its majority the eastern wing was economically discriminated against and exploited .a section of the ruling elite of the western wing of Pakistan become the oppressors and exploiters of the east Pakistani people leading to their eventual secession after a long and painful war of liberation ending in 1971.the contribution made by east Pakistan to Pakistan economy and society was huge, though never fully recognized or appreciated by west Pakistani's. In 1947 Pakistan had every right to be called an agricultural country because at that time major share of Pakistan's gross domestic product was from agriculture which contributed around 53% compared to 7.8% from manufacturing and 11.9% from retail trade. More than 65% of Pakistani labor force worked in agriculture and almost all of Pakistani exports consisted of primary products, essentially agricultural commodities like jute, tea, which not surprisingly originated from East Pakistan. Pakistan is no more an agrarian country as agriculture contributes on 21% of GDP and 45% of labor force is employed in this sector now. Manufacturing sector has grown as its share in GDP is now25%.services sector has dominated all other sectors and contributing more than half of the county's GDP. Nature of exports has also changed as now Pakistan is exporting manufacturing products.
  2. 2. ` Laying the foundation 1947-58: In 1947 Pakistan was indeed a predominantly agrarian, underdeveloped, newly independent nation, with little industry few services, and no infrastructure. The primary task of the government .attempts to restructure the economy and to ensure that it was on a strong footing could be undertaken only after the initial political and economic shocks had been dealt with. The decade of development:1958-68 1960 stands out as the decade with the best performance. Many of the economists have written about Ayub khan's era and they are generally agreed that considerable economic growth and development did indeed take place. They argue that significant leaps were made in industrial and agricultural production Observers have pointed out that this aggressive capitalist development caused serious economic, social and political tensions. They argue that there was increased disparity in income across different regions. Major growth was in central Punjab and in Karachi; critics say that two regions were permitted to grow at the expense of the rest of the country. The bad luck years: 1971-77 Bhutto's economic policies were more illiberal than those of his predecessor, and his nationalization was said to be the major cause for a huge downward trend in growth. In the 1970s GDP grew by close to 5% which indicates the need for a thorough reexamination of the economic programmed of Bhutto. Bhutto was an unlucky politician in many ways and events beyond his control affected his economic programmed. The economic loss of East Pakistan was strongly felt. The devaluation of the Pakistani rupee by120% in May 1972 brought significant dividends in terms of export growth in one year (1972/3) The 1973 OPEC price increases played havoc with Pakistan's import bill and the balance of payments deteriorate
  3. 3. ` Also, the period after 1973 saw a serious worldwide recession affecting Pakistan's exports. Recurrent domestic cotton crop failures and floods in 1973,1974 and 1976,affected Pakistan's main exports, The large nationalized units taken over but Bhutto were the most inefficient in the industrial sector, and despite this, industry experience a reasonable growth rate. Bhutto's government also laid the foundations for future growth and development from which his successor benefited .basic industries were set up and a base for a capital goods industry which resulted in subsequent growth. The Liberal economic policies of Zulfiqar Ali Bhutto were responsible for growth not only during his own tenure but also in period after 1977. The second military government 1977-88 General Zia regime was more liberal in economic terms but not politically than any one of his predecessors. While the civilian military bureaucracy played a prominent role in acquiring capital and in assuming the role of entrepreneur and financer, numerous individual capitalists emerged in the post-Bhutto era. High rates of industrial growth were led by coming on stream of earlier investment made by public sector under Bhutto, especially in heavy industries and also by rapid expansion in domestic by USA helped ensure that steps were taken to increase growth. remittances from middle east and aid from abroad helped launch Pakistan second economic revolution .By becoming the capitalist world's front line state against soviet union and specially against expansionism .in the region Pakistan’s government gained in terms of financial aid and resources. However general Zia’s martial rile inflicted deep rooted damage to Pakistan society.
  4. 4. ` The era of structural adjustment 1988-1999 The period after the death of general Zia in 1988resulted in return of democracy to Pakistan, between august 1988 to august 1997, Pakistan had four general elections with both Benazir Bhutto and nawaz Sharif being returned to power twice. Since none of the elected governments was able to complete its full term there have also been more than a few caretaker governments. Musharrafera: Pakistan’s economy has witnessed many changes since October 1999, some for the better and others for the worse. There was deregulation of the banking sector, including sharply cutting loan interest rates, putting in place a regime that allowed banks to engage more liberally in giving consumer finance loans, and lifting restrictions on the number of branches that foreign banks could open in Pakistan. Easy access to low-cost consumer finance led to a sharp rise in the sale of consumer goods such as cars, motor cycles, cell phones and home appliances had been noticed. hose years, from about $ 450 in 1999 to about $ 1,000 in 2007. In making this case, the government chose to ignore the fact that a falling dollar required that the per capita income figure be proportionately scaled down to give a more realistic picture of the actual figure. The government also tended to gloss over the fact that it had artificially propped up the value of the dollar against the rupee by directing the State Bank of Pakistan to regularly buy dollars from the open market. The government said it had propped up the rupee’s value to help exporters, arguing that a higher rupee-dollar exchange rate would have meant that exporters would have earned fewer dollars for their exports, thereby putting additional pressure on the country’s balance of payments. While there was considerable merit in this argument, the downside of the State Bank’s
  5. 5. ` interventionist operations in the currency market was that it made imports more expensive in rupee terms Higher-priced capital goods, in turn, increased the cost of expanding manufacturing plants or setting up new factories, resulting in a slowing down of the industrialization process. Like all bubbles, the low-interest-rate bubble, too, had to burst one day. Within a few years, loan interest rates again began to rise steeply, soaring from a low of about five per cent per annum in 2002-03 to over 15 per cent today for business loans and 22 per cent for consumer finance loans. Higher education is a federal subject, and the Musharraf-Aziz government has to be given credit for setting up a Higher Education Commission and for significantly increasing the budget allocation for higher education, Foreign remittances start growing speedily in Musharraf era The Democratic Government ofZardari: In 2012 the nation was poorer, hungrier, and more deprived than it was in March 2008. For the first time since independence in 1947, democratically elected legislatures completed their constitutionally mandated tenures in Pakistan. This is indeed a significant landmark in Pakistan’s democratic history. While the Musharraf regime posted 6 per cent to 8 per cent economic growth rates, the Zardari government couldn’t muster even a 4 per cent GDP growth. Itis, however, truethat the good fortunedid not favour the elected governments. the Zardari government came to power in 2008 when the global economies experienced the worst economic recession since the great depression of the 30s. The demand for Pakistani goods declined and investment flows dried up, thus starving Pakistani industries.

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ECONOMIC HISTORY of Pakistan.

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