debt crisis. Exports stagnated and Pakistan lost its intemational markets. While both the NawazSharif and Benazir Bhutto governments supported free market economy and privatization policies,neither were able to successfully implement them because there was no political will to reform therent-seeking activities of the ruling elite.Assignment 1Economic growth and development in Pakistan: Historical Analysis and Future OutlookDespite huge economic odds after independence, Pakistan's economy was growing at animpressive rate of 6 percent per annum in the first four decades of its existence. But Pakistan couldnot sustain its good economic performance because of dependency on foreign assistance andimports and inability to develop human capital. While wars, terrorism, geo-strategic factors andpolitical upheavals have restricted Pak economy from reaching its potential, deep-rootedinstitutional inefficiency and elite capture is proving to be the greatest hurdle in turnaround of Pakeconomy.In 1999, there was a military take,over by General Pervaiz Musharraf. Economic policies duringthis time were able to avert debt crises. Again, there was injection of foreign capital from UnitedStates as Pakistan became a frontline state in war against terror in the aftemath of 9/11 bombings.While the Musharraf regime did bring in a team of IMF trained economic managers to achieveeconomic reform, and democratic transformations were initiated such as giving media freedom,local govemment and women representation in assemblies, still the productive capacity of theeconomy was not enhanced especially nothing was done to avert future energy shortages.Since 2008, there have been 3 democratically elected govermments in power. But PAK economyhas not been able to break away from cycles of balance of payment crises and dwindling foreignexchange reserves followed by an IMF emergency program. These programs help to avert theeconomic default, but at the cost of low growth and high inflation. The PPP govemment of AsifAli Zardari and Syed Yousaf Raza Gillani was marred by rise in violence particularly in Pakistan'seconomic hub of Karachi, corruption, and unsustainable economic policies targeted at engagingpolitical elite rather than restoring the economy. In 2013, PML (N) govermment was elected witha two third majority in Parliament. However, due to a highly personalized style of govemance,widening development gap between northem Punjab and the rest of the country and confrontationwith military establishment, the needed structural economic reform never materialized. In 2018,the PTI government under Imran Khan had to contend with a huge fiscal and balance of paymentdeficit and low foreign reserves. Despite, its initial reluctance, the govermment had no choice butto borrow from IMF again and GDP growth was bound to stall as a result. However, Pakistan'scurrent economic difficulties are also an outcome of government struggle to instill businessconfidence, reform public sector enterprises, correct the taxation system, address the issue ofcircular debt in power sector, substantially increase exports despite a huge devaluation of currency,control food inflation resulting from activities of mafias and poor harvests and dealing with abelligerent opposition and intemal dissent within the ruling coalition. Over and above these issues,the COVID-19 closures and lockdowns caused shrinkage of the PAK economy in 2020. There issome positive news on the economic front because remittances have increased, foreign reservesare going up and the currency seems to be stabilizing without intervention. Construction and textilesectors are picking up. Concerted efforts are being made to document the economy. Yet theeconomic and political situation remains fragile.In the 1960s, Pakistan was adopting state capitalism for rapid economic development. During thistime agricultural and industrial production increased rapidly, dams were built for energygeneration, highways were constructed, private businesses flourished, and poverty levels werereduced significantly. This was so called "Golden Era" for Pakistan in terms of economic growth,but it happened under a military dictatorship, only 43 families were owning all businessenterprises, and growth was made possīble through generous foreign aid from United States.Political upheaval in the 1970s which led to separation of Bangladesh from Pakistan, brought intopower the regime of Zulfiqar Ali Bhutto who adopted a socialist agenda, forcefully taking overprivate businesses and putting them under government control. While this nationalism drive wasmeant to reduce the gap between the rich and the poor, in actuality poverty, income inequality andinflation increased. Economic growth started declining, PAK rupee started losing value and publicdebt became a problem. Bhutto was a democratically elected leader, but his management wasautocratic. To empower himself he politicized government offices and systematic corruptionstarted taking root.In the 1980s, military government of general Zia-ul-Hag, again liberalized the economy and madeit market-oriented. A tremendous boost to economic activity was provided by rising workerremittances. Also, the United States provided huge amount of financial assistance to Pakistan forsupporting the war in Afghanistan against the Soviet Union. This enabled an increase in the GDPgrowth of more than 6%. However, Pakistan's saving rates and exports remained low andinvestment in human development and infrastructure development was sidelined and debt burdenincreased. To hold on to power, Zia enforced a strict version of Islamic Ideology, promoted throughthe state-controlled media and madrassas which were linked with militant religious organizationsengaged in the Afghan war. This gave rise to extremist violence, weakening the state and adverselyaffecting investment and sustainable growth in subsequent years.The key factors contributing to the resilience and dynamism of PAK economy:Overall, looking at the economic history of Pakistan, it is evident that there has been economicdecline. Pakistan's economy is further away from achieving 5Es than it was in the 1960s. Whileincomes have grown, only the elite and privileged classes have benefitted from growth.No single economic policy, regime or institution can be blamed for this situation. Nor can there bea simple or easy solution.In the 1990s, there was return to democracy, but the economy suffered from poor govemance,corruption and low growth as power alternated between the Pakistan People's Party under BenazirBhutto and the Pakistan Muslim League (N) led by Nawaz Sharif. The GDP growth rate wentdown to 4 percent and Pakistan faced persistent deficits in revenue and foreign trade, triggering a But it is worth considering the key factors contributing to the resilience and dynamism of PAKeconomy, which have helped the country survive economic debacles and build a positive economicoutlook in future:• A young population (65% is in working age bracket) having some access to informationtechnology, creates self-employment opportunities particularly in the services sector.• Alarge informal sector which is not captured in official statistics, but nevertheless providesemployment and sustains consumption growth.Remittances from Pakistanis working abroad help to improve living standards, reducepoverty and positively impact Balance of payment.Economic empowerment of women while happening very slowly, is also an untapped areaof inclusive and sustainable growth.State Bank of Pakistan has been performing quite well in recent years in implementing abalanced monetary policy and financial inclusion especially by promoting branchlessbanking.With all its flaws, the democratic process has continued in Pakistan for more than a decadewith the military not taking part in political decision making, at least overtly. As a result,remarkable success has been achieved in war against terror and security situation acrossthe country. At the same time there seems to be a growing consensus that economicrecovery is vital for safeguarding national security in the long run.Assignment LiRead Pakistan's economic history carefully.Based on this assessment do you think Pakistan economic situation will improve or deteriorate innext 5 years? ExplainDescribe 5 economic strategies for macroeconomic turnaround in Pakistan.

An area of economics known as "development economics" studies the factors and processes that affect…

Read Pakistan's economic history carefully. Based on this assessment do you think Pakistan economic situation will improve or deteriorate in next 5 years? Explain Describe 5 economic strategies for macroeconomic turnaround in Pakistan.

Read Pakistan's economic history carefully. Based on this assessment do you think Pakistan economic situation will improve or deteriorate in next 5 years? Explain Describe 5 economic strategies for macroeconomic turnaround in Pakistan.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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