Economic Journey of Pakistan in Seven Decades

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Dr.Syed Mehboob
Pakistan is only country on the earth after Riyasat e Madina which was established in the name of Allah Almighty and it was promised that this country would be free from all sorts of prejudices, biases, oppression, discrimination and exploitation. Its economy would be based on Islamic principles, free of Riba, its resources would be divided equally amongst citizens, there would be no privileged class, no VIP or VVIP culture and Quaid e Azam himself practiced on these principles. In 1950 its GDP was only ten billion rupees while in 2021 its GDP is around Rs. 47,700 billion and it is 47th largest economy of the world. Pakistan is the fifth most populous country in the world and the second largest Muslim country in terms of population after Indonesia. Its population is about 225 million. It has an area of 881, 913 square kilometers and is the 33rd largest country by area. It also has a 1,046 kilometer coastline along the Arabian Sea and Gulf of Oman. In terms of purchasing power parity (PPP) in 2021 its GDP is 1,110 billion and per capita is US$ 5,893, while in terms of nominal its GDP is US$ 296 billion and per capita is $ 1,543 . Its Human Development Index is 155th.
According to the Economic Complexity Index Pakistan is the 67th export country of the world.

Country GDP(PPP)US$ billion GDP(nominal ) US$ billion GDP per capita (PPP)US$ GDP per capita ( nominal)US$
Pakistan 1,110 296 5,839 1,543
India 10,110 3,050 7,333 1,543
Bangladesh 966.48 352 5,812 2,122

In 1948 Pakistan’s bank deposits were only one billion rupee which increased to Rs. 18,000 billion in 2021. In 2021 banks earned a huge profit of Rs. 4,227 billion. In 1948 there were only 213 bank branches while in 2020 there are 33 schedule banks having 14,701 branches across the country. In 1948 one US dollar was equal to 1.30 rupee while in 2021 one US dollar is equal to Rs.164. In 1988 Pakistan’s total debt was Rs. 523 billion which whoopingly increased to Rs.45,470 billion. In 1951 its population was only 33 million which now is around 22.5 million.
It would be surprise to know that the first budget which was presented by Quaid e Azam Muhammad Ali Jinnah was a surplus one and expenses were less than revenue. From 1959 to 1960 GDP grew 0.9 % the slowest in the history of Pakistan. However when General Ayub Khan presented Pakistan’s bases to America against Russia and Pakistan completely came under the influence of America situation had been changed. In return America provided huge aid to Pakistan which made Pakistan dependence on foreign aid and financial assistance, with economic growth averaging 5.82 percent during his remaining tenure in office to 25 March 1969. Manufacturing growth in Pakistan during this time was 8.51 percent, far outpacing any other time in Pakistani history. Pakistan established its first automobile and cement industries, and the government constructed several dams, including Tarbela and Mangla Dams, canals, and power stations, in addition to launching Pakistan’s space program.
Along with heavy investment in manufacturing, Ayub’s policies focused on boosting Pakistan’s agricultural sector. Land reforms, the consolidation of holdings, and strict measures against hoarding were combined with rural credit programs and work programs, higher procurement prices, augmented allocations for agriculture, and improved seeds as part of the Green Revolution. Tax collection was low, averaging less than 10 percent of GDP. The Export Bonus Vouchers Scheme (1959) and tax incentives stimulated new industrial entrepreneurs and exporters. Bonus vouchers facilitated access to foreign exchange for imports of industrial machinery and raw materials. Tax concessions were also offered for investment in less-developed areas. These measures had important consequences in bringing industry to Punjab and gave rise to a new class of small industrialists.
Some academics have argued that while HYV technology enabled a sharp acceleration in agricultural growth, it was accompanied by social polarization and increased interpersonal and interregional inequality. Dr. Mehboob-Ul-Haq blamed the concentration of economic power to 22 families who were dominated the financial and economic life of the country by controlling 66 percent of industrial assets and 87 percent of banking.
During this period difference between rich and poor and economic disparity between East and West Pakistan increased. Pakistan fought a war against India in 1965 in which Pakistan forces gave a befitting response to Indians and Pakistan forces strength was proved. United States of America which was ally of Pakistan turned its eyes and stopped support and aid to Pakistan. Ayub Khan did a disaster and handed over government to Yahya Khan who was incompetent, loose character, senseless person and his foolish policies resulted in breakage of East Pakistan to Bangladesh.
Now in remaining part of Pakistan Zulfiqar Ali Bhutto was elected as Prime Minister of Pakistan although returning Pakistani Prisoners of War from India, establishing Pakistan’s nuclear programme, constitution of 1973 were the major accomplishments of Bhutto’s era his privatization policy was a failure. Z. A. Bhutto was dismissed by Zia ul Huq. Once again United States of America needed Pakistan’s help to counter the advancement of Russia which occupied Afghanistan and threatened to advance towards oil rich Middle East. Pakistan helped Afghan freedom fighters while aid received from USA helped Pakistan’s economy. During this period of 1977 to 1988 remittances from Pakistani diaspora living abroad helped to stabilize Pakistani economy. However Pakistan did not take any mentionable step to stabilize internally and to get rid of from foreign assistance. After Zia’s death finance minister approached International Monetary Fund ( IMF) for assistance because now American once again turned its eyes since it got its target of defeating Russia with the support of Pakistan, left its ally at a cross road helplessly. It was a blunder mistake and after this almost every government relied on foreign debt. In 1990s average growth was better than 2000s and average investment, development expenditure and tax collection was better in 1990s. In 1998 during the era of Nawaz Sharif Pakistan tested its nuclear capability and became nuclear power which annoyed America who imposed sanctions against Pakistan.
The very first three years of Pervaiz Mushraf were of instability of economy as economic growth was only 2% while it got 4.3 % economic growth in heredity. Debt rose to 599 billion which was the highest in the history of Pakistan till then. An imported Prime Minister Shaukat Aziz who was an employee of CITI bank was brought here and he introduced consumer financing ignored manufacturing and it was a target killing of middle class in Pakistan. Whole Pakistani society trapped in whooping debt and interest which strictly is prohibited in Islam. Interest was spread deliberately and it proved disastrous. During this period Mushraf brought USA so called war against terrorism and f totally bowed down before American wishes and provided bases of Jacobabad, Shamsi to America and handed over many Pakistanis to US and in return America provided financial assistance to Pakistan. There was complete disorder in tribal areas and Northern Province, in Baluchistan after murder of Akbar Bugti it was a chaos.
Before 9/11 economy was in turmoil, Inflation which was 3.9 % in 1998 touched to 12.9 % , tax collection was reduced , budget deficit was increased from 4.3 % 7.3%., trade deficit increased from 0.4 % to 8.8 % , current account deficit increased from 1.9 % to 8.2 % which was the largest one in the history of Pakistan. After 9/11 Paris Club provided Pakistan US$ 2.5 billion. Pakistan’s economy due to foreign assistance improved temporarily.
Zardari period was also a difficult one now Americans slowed down its aid and Pakistan was forced to get help from IMF. At that time Shaukat Tareen was the finance minister of Zardari who is now in Imran Khan’s cabinet. It would be interesting to note that both Shaukat Tareen and Hafeez Sheikh were finance ministers in Zardari’s cabinet and Hafeez Sheikh was also in Imran Khan’s cabinet and now is Shukat Tareen. In 2008 the growth rate was 0.4 % the slowest one in the history of Pakistan, inflation was 17%.
During the period of Nawaz Sharif Pakistan again went to IMF for loan and American New great game was started. Some economic indicators were improved growth was not less than 4.1 % in any year, however current account deficit which was 1.1 % increased to 6% in 2018. During this period energy and infrastructure sectors were given much importance. 2014 sit in of Imran Khan affected economy negatively and Panama Leak proved disastrous for Nawaz Sharif and he was declared disqualified by Supreme Court.
Pakistan Tehreek e Insaf government led by Imran Khan came into power with much rhetoric and tall claims. It announced ten point agenda for its government. Promising to introduce tax reforms based on justice, to reduced circular debt and corruption, energy sector reforms, to reduce the level of indirect taxes in 3 years and to increase direct taxes, increase allocation for health and education. All the tall claims were proved wrong and remain on paper while on ground almost all the cabinet members are those who were right hand of Zardari, Musharraf and Nawaz. In three years average growth remain low to 1.9% while IK government received 5.5 % from Nawaz government. The growth will remain within 3.5 % in five years. Currency value came down to Rs. 40 against dollar in three years. In 2021 trade deficit increased 7 billion dollars, current a count deficit might touch to US$ 5 billion, FDI declined $750 million. However remittances remained higher at $29.4 billion. Research shows that in eight years remittances were US$ 30 billion and remaining amount was sent to get the benefit of income tax ordinance 111(4) .
Seven decades journey shows that less effort was done to stabilize Pakistan’s economy and government ministers, bureaucracy and politicians they relied on foreign assistance and huge amount was spent on their protocol, luxurious life style, and less was spent on education, human development, employment generation projects. There should be needed to allocate sufficient amount for providing international standard and quality education to our youth, turned them to skilled one, eliminate Riba based economy and to introduce Islamic Economy based on social justice, equality and merit should be introduced at every level.

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