Economic reforms in Pakistan

Topics: Economics, Economic growth, Macroeconomics Pages: 12 (3038 words) Published: May 20, 2014
ECONOMIC REFORMS IN PAKISTAN
There is a widely shared consensus about the nature of reforms that Pakistan should embark upon. This consists of two components – stabilization and long term structural reforms. Under the first component the economy has to be stabilized with the help of fiscal consolidation, widening of tax net and mobilization of domestic resources, cutting down the losses of state owned corporations, curtailing wasteful development expenditure and assigning priority to removing supply-side bottlenecks such as energy and infrastructure, keeping inflation under control and maintaining exchange rate stability. The second component requires governance reforms in the structure, processes and human resource policies of the Federal , Provincial and Local governments, taxation and tariff reforms, removing microeconomic distortions such as issuing selective Statutory Regulatory Orders (SROs) for specific firms, liberalizing and deregulating goods and factor markets, strengthening regulatory architecture, promoting market competitive forces and building human capital particularly in science and technology. THE RECORD 1947-2012

Last five decades have witnessed a remarkable change in the economic fortunes of various countries and continents. The poor, underdeveloped, developing and emerging countries that account for two-fifth of the world population have, by and large, undergone structural transformation of the magnitude that is unprecedented and was not anticipated. The economic power equilibrium is gradually shifting from the advanced countries to developing, countries. The distinction between advanced and developing, North and South, First World and Third World is becoming redundant and irrelevant. For the first time since cross-country data on poverty is being compiled all the six continents have recorded a decline in the incidence of poverty. The Millennium Development Goal of reducing poverty by one half has been achieved five years ahead of 2015. The two lagging regions of the World-South Asia and Sub-Saharan Africa – are growing rapidly and lifting millions out of poverty. In the 1960s Pakistan was considered as a model developing country and its manufactured exports were higher than those of Thailand, Malaysia, Philippines and Indonesia1. While our larger next door neighbor was stuck with 3 percent growth rate Pakistan was averaging six percent annual growth rate. The Eastern wing of the country felt left behind in this rapid progress and decided to become independent in 1971. At that time Bangladesh’s economic prospects were dubbed by the international community in most uncharitable terms. In the 1970s Viet Nam was completely devastated by a prolonged war fought against a super power. Advance the clock forward. Forty years later not only all the four East Asian Countries mentioned above have become economic power house but India, Viet Nam and Bangladesh – way behind us in almost all the indicators – have not only caught up but are surging ahead. India, despite its large population and uninterrupted period under democracy, has become one of the drivers of global economic growth momentum. A slowdown in Indian economy is considered with serious trepidation by the rest of the world. Why has Pakistan ended up in its current economic condition? Conspiracy theories galore that the Americans, Jews and Indians have ganged up on us to destabilize the country. They have got us embroiled in unnecessary wars in Afghanistan, promoted all kinds of ethnic, sectarian, civil-military, religious divisions in the society, made us dependent on foreign aid (IMF and the US particularly) and deprived the country of its sovereignty in decision making. According to them, the last decade has seen intensification of these nefarious activities and the recent economic regression faced by us can be directly attributed to the intensity of these efforts. The problem with this explanation is that it assumes that we a proud nation of...
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