Musharraf's Administration and Pakistan's Economy

By Shuja, Sharif | Contemporary Review, March 2005 | Go to article overview

Musharraf's Administration and Pakistan's Economy


Shuja, Sharif, Contemporary Review


PAKISTANIS have much to smile about today. Economic growth is up, according to the conventional economic indicators. This good news comes after a dismal period of more than a decade, especially in the commodity-producing sector. Exports have increased substantially in the past year and the current account shows ever-growing surpluses. Capital inflows are up, and the relatively small stock market has boomed. Budgetary trends are consistent with the declared targets. While inflation rates have gone up recently, they are still within manageable limits. All this would have apppeared unlikely even a few years ago.

The 1990s was a very adverse decade as far as the material conditions of most Pakistani people were concerned. Average growth rates of national income plummeted to less than 4 per cent per annum, compared to the earlier decade's rates of more than 6 per cent per annum. As a result, the incidence of poverty rose in 1999 to 34 per cent, from 17 per cent two decades earlier. This deceleration in growth was associated with low rates of investment, as private investment failed to pick up and counterbalance the decline in public spending.

Though the sanctions imposed on Pakistan during that decade over its nuclear programme had been a factor, the economic mismanagement of the government played a greater role. Industrial growth rates almost halved, from 8.2 per cent to 4.8 per cent per annum. The percentage of households living in absolute poverty increased from 21.4 per cent in 1990-91 to 40 per cent in 2000-01. By June 2001, more than 56 million Pakistanis were living below the official poverty line.

The Pakistani pattern has been characterised as 'growth without development', because, despite its respectable per capita growth over the second half of the twentieth century, the country systematically underperformed on most social and political indicators such as education, health, sanitation, gender equality, fertility, corruption, political instability and violence, and democracy.

General Pervez Musharraf, immediately after taking power, concentrated on developing the economy and on improving governance. With a population now approaching 150 million, and a high incidence of poverty, there can be no doubt that the primary challenge for any government would be to improve the living standards of the people. Musharraf's administration concentrated on the macro-management of the economy, in order to lay the foundation for sustained growth. Infrastructure, in terms of communications, energy and water supply, was given priority, with the long-neglected railway network receiving attention so that it became profitable. Highways and ports remained priority areas, notably in Balochistan, where the Gwadar Port project proceeded apace, as did the Saindak project, both with Chinese assistance. Social services, including education and health facilities, were allotted increased resources, with special emphasis on science and technology.

In the contemporary world, a country's international relationships can contribute significantly to its economic development. Musharraf gave due weight to this aspect, and sought the cooperation of major international financial institutions such as the World Bank and the IMF, in stabilising the economy in general, and managing the country's debt problem in particular. In several ways, the willingness of the Musharraf regime to be a key ally of the US in the war on terror had substantial effects upon the economy. It has meant the waiver or rescheduling of more than one-third of Pakistan's external debt, which provided much-needed short-term relief. It has led to increased foreign aid flowing to Pakistan.

At present, Pakistan is receiving from the USA $700 million annually in bilateral assistance, $84 million monthly to defer cost incurred in the anti-terrorist effort and $1.7 billion in funds from the International Financial Institutions (IFIs) where US support is crucial. …

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