Since independence, the economy of Pakistan has always been in vicissitudes situations. If we look at it from the economic perspective, the historical background of the country seems so satisfying, as compared to the current situations. Even though during initial years of the partition the country faced lot of hardships. But during Gen. Ayyub Khan’s era the country has managed 5.82% average growth rate from 1958-1969. However, signing a major benchmark in the history, this period was followed by a bad luck decade of Bhutto’s government and Gen. Zia’s liberal government. The post Zia’s period has faced lot of political turmoil which resulted the military dictate of Gen. Musharraf. Though the economy had shown some remarkable trends in Gen. Musharraf’s period, but it did not work out for the shrinking economic situations of Pakistan.
Soon after the partition Pakistan had started to lay its foundations. Meanwhile, the country did not get the proper distribution of resources the assets were divided in the ration of 17 to India and 5 to Pakistan, bulk of the irrigated land was in Pakistan and major canal system, the military division was 65 to 35 percent in the favor of India. During that time, Pakistan was a dominant underdeveloped agrarian with a little share of services, manufacturing, and infrastructure, backed with millions of refuges. Therefore, it was not possible to attain a higher level of growth in that period. However, the Korean war of 1952 made mercantile class to raise, which helped to attain higher gains and attempts were made to structure the structure of bureaucracy.
Meanwhile, from 1958/68 Pakistan had laid a major benchmark in its history of development. In this period the reigns of the country were in the hands of General Ayyub. The economy was growing 3 times faster than other countries of the South Asia. The growth rates exceeded 20 percent per annum and the agricultural and industrial sector was developing significantly. There was massive growth in the industrial and agriculture sector experienced first time after the partition. The manufacturing sector grew by 17% and agriculture grew by 6%. This decade of development applied a bureaucratic supported capitalism. However, some people criticize that his non- liberal policies of bureaucratic capitalism model has increased income inequality and this rapid development with the exploitation of east Pakistan and labor class ended with a political disability during the initial years of 1970’s, which resulted the partition of east Pakistan.
In 1970’s, Zulifqar Ali Bhutto came into power with his slogan of “Rotti, Kapra and Makaan”. This decade is often stated as the decade of bed luck, which is mainly supported by the worldwide recession in exports, the partition of East Pakistan and floods of 1974 and locust attacks. Moreover, Bhutto was mainly devoted to the socialist economy, and just because of that this period is critics by his failure. In his period, he nationalized the financial institutions- like banks and insurance sector and some basic industries. His nationalization policies became the major reason for the loss of industrial units and the confidence of investors to invest in Pakistan. Meanwhile, his polices created misallocation of resources and the overall growth was declined, form 6.8% per annum in 1960’s to 4.8% per annum in 1970’s. Also, even though he introduced the land reforms, some criticize that his nationalization policies were feudal led, which were introduced to clip the wings of industrialist class that has grown tremendously in 1960’s.
General Zia took the reins of the country in 1977. During that time, the USA was trying to pull Soviet-Union back from Afghanistan. Pakistan had taken a part in that, which ended up with the Islamization of Zia, which he done to increase his political support. At the same time, bulk of foreign aid was received by standing on the front line against the Soviet Union. Moreover, the increasing trends of industrial growth can be seen in his period, which were the result of investment in Bhutto’s era. Hence, GDP grew at the average rate of 6.6% per annum in General Zia’s period.
The post Zia’s era led to the structural adjustment programs. In this era most of the policies were supported by IMF programs. Pakistan was first introduced to the structural adjustment programs during General Zia’s regime in 1982. However, after receiving the first SAP loan, the military government discontinued these foreign loans when Pakistan received 3.2 billion US dollars owing to Afghan-Soviet war. But in the late 1980’s because of decline in the industrial sector, which was a major source of income, the country faced twin fiscal and exchange deficit accompanied with the reduction foreign aid. This compelled the government to look forward to the Bretton Wood Institutions for support. As a result, the World Bank and IMF impelled Pakistan to decrease the public spending and increase taxes, which eventually resulted in the cuts of developmental projects.
Moreover, in 1998 Pakistan has tested its first successful nuclear device. Soon G-8 had imposed numerous sanctions on it -like many counties have cut foreign aid, remittances were slowed down and defense sales were terminated. This made devastating effects on economy. Later, on 9th of September 2001, two planes hit the World Trade Center. Because Pakistan was a best possible strategic location in the South Asia and US felt a dire need of it for the war on terrorism.
No doubt that the post 9/11 developments became possible on the account of 9/11. The post 9/11 period had shown some remarkable trends in Musharraf’s regime. The rate of investment grew by 17.2% of GDP to 23.0% from 2001-2007, domestic debt was decreased from 17.8% to 16.1% of GDP in the same period, which is almost 30% of the total GDP, much of bilateral and unilateral foreign aid were sent to Pakistan, i.e., in 2002 $11 billion were sent to Pakistan. In 2003-4 it was claimed that Pakistan has finally ended up from calamitous decade of 1990s. However, Pakistan has seen some tremendous growth in Musharraf’s era. But it can be criticized that his roaring era was based on the deceptive foundations of investment and consumer-led growth. No doubt, it was a sort-term growth, and the thing lacking was a long-run strategy to send that foreign aid into the productive sectors.
Furthermore, the post Musharraf period was recorded as a dire period for Pakistan. In 2007/8 growth rate started shrinking by 37%, which was hit by numerous factors like the Lawyers’ movement which was the outcome of lawyers, when Musharraf ousted the chief justice of Pakistan, the death of Benazir Bhutto, the care takers government’s role was also critical, the global financial crisis and the Laal masjid incident. Meanwhile, it was PPP’s govt. from 2008/13, which is often criticized as a worst government in the history, because of its management. So, for that, Pakistan had already faced lot turmoil, but it was again hit by disastrous floods of 2010, which swept much of the infrastructure and agricultural land. As a result, the growth rates fell; inflation rate went to double digits, FDI fell and so did the tax to GDP ratio.
Many claim that the PML-N’s government 2013/18 left the economy stronger, bigger and batter. However, it was exclusively based on only growth rates, which seems quite satisfying if we look at statistics and are supported by IMF loan schemes. In this period, the country has faced massive current account deficit, a sharp decline in exports while imports remained flat, the agriculture sector was ignored, large public debt and there was lack of public sector reforms.
PTI came into power in 2018. The growth rate in FY18 was 5.84. In a mean time just after a year the whole world was hit by a catastrophe –COVID-19, which has put the world economy into its knees. It has also largely hit the Pakistan and made its economy to shrink. The growth rates started to decline. In FY19 the growth rate declined to 0.99 and in FY20 it was recorded 0.38.