Written By: Afreen Baig
The 1990’s was a lost decade for Pakistan, mismanagement at its helm and corruption rampant. Formation of failed policies, coupled with sheer incompetence and lack of commitment, kept deteriorating the economy of the fragile Country. Benazir’s era was further characterized by ungoverned manipulation and personal extravagance of her husband Zardari.
By 1999, not only were the $10 billion Foreign Reserves misspent without any accountability, but it also shattered the confidence of our nation. Expatriate Pakistanis kept a cautious outlook of the situation and held their foreign reserves back.
In 1999, Revenue generation of around Rs.308 billion could not meet the growing expenditure requirements; with only an average of Rs.80 billion being spent on Public sector development programs (PSDP) annually, and no visible project to boast about. From this Rs.308 billion around 65% was being utilized for debt servicing. In 1988 Pakistan’s foreign debt was $18 billion, but at the end of 1999 it had accumulated to become $38 billion. A 100% increased burden on the already crippled economy. Public and external debt exceeded 300% of Foreign exchange earnings. Pakistan had become a highly indebted poor country. Poverty levels also increased to become 35% according to economic survey. This glooming situation was not being dispelled.
While the world was progressing, Pakistan’s economy was stagnated. Overall there was a feeling of despondency and uncertainty. It not only lowered the morals of the business community, but also affected adversely the Foreign Direct Investment (FDI). Foreign Investment started diverting to other promising Asian markets, especially that of India for their future prospects.
Nawaz Sharif and People’s Party often lament that during their tenures US and IMF Aid was suspended; and that President Musharraf’s government received huge aid after 9/11 to overcome the economic problems. To set the record correct, USA and IMF aid was suspended only after the Nuclear Atomic blasts of May 1998, but that too was RESUMED later that year in November, a week before Nawaz met President Clinton in USA. Before May 1998, the governments of Nawaz Sharif and Benazir Bhutto well-received worldwide aid and assistance from USA, IMF, OPEC, European countries, ODA & OOF bilateral agreements and World Bank.
The inheritance of the ailing economy that took place after October 1999 was not an easy task for the leadership of President Musharraf. Pakistan needed quick reforms, resource allocation, stabilization of policies and alluring back the Foreign Reserves and Foreign Direct Investment.
A misperception persists within some critics that attribute completely the turning around of Pakistan’s economy to: US aid or 9/11. Therefore, let it be clarified that major economic indicators had improved before 9/11, and the economy had already started showing signs of recovery and revival.
In that SHORT span of 2 years BEFORE 9/11, Pakistan’s revenue increased from Rs.308 billion to become Rs.395 billion. Exports increased from $7.5 billion to become $9.2 billion. Foreign Reserves increased from $1 billion to become $3.25 billion. Debt servicing as a ratio to Revenue decreased from 65% to 57%. Public and external debt as a percentage to Foreign exchange earnings declined from 300% to 250%. Current account deficit decreased from $2.4 billion to become $510 million. And, Pakistan’s large-scale manufacturing grew by 11% in June 2001 against 3.5% in 1998. These facts should set aside the skeptical grumblers.
Therefore, the entire credit of stabilizing Pakistan’s economy goes to the visionary decisions, sustained macro-economic policies and financial reforms of President Musharraf and the Prime Minister Shaukat Aziz. These also highlight their good intentions and ultimate honesty. Their sense of duty towards the country, honesty and the genuine resolve to address the problems does not arise from 9/11. Unlike their predecessors who swept problems under the carpet.
Now countering the other most popular allegation, i.e. US aid enabled the recent economic achievements.
The annual flows Pakistan has received during the last six years amount to approximately $ 1.75 billion from all types of US assistance – military, economic, and reimbursements for logistics support. Of these flows, the aid – military and economic accounts for $ 700 million annually.
This amount is 4.5% of total foreign exchange receipts, 7.2% of total budgetary expenditures, 6.4% of total value of Imports, 4% of total Exports and 5.8% of current account receipts of Pakistan. As a proportion of GDP of Pakistan these gross flows from all sources work out to only 3%. Negligible!
These figures by all means indicate the strength of Pakistan’s booming economy and establish the FACT that Pakistan is no more dependent upon US or foreign aid. Pakistan’s economy has managed to wriggle out of their clutches.
Pakistan’s economy grew at 6.5% to emerge as a $160 billion economy in 2007. Pakistan’s Revenue now stands above Rs.700 billion; as they increased by above 100% in just 7 years. The FBR estimates that there are now around 2.8 million Income Tax payers. A fully functional Tax Management System (TMS) was implemented on International standards with the assistance of World Bank.
Pakistan’s Public sector development program (PSDP) spending increased by above 400% to become Rs.520 billion. This has initiated major infrastructure programs throughout the country, including 7 Motorways and several Highways. Bridges erected and underpasses paved. 18 new Universities are already functioning and 9 Engineering Universities under construction.
Financial reforms enabled Pakistan to emerge as the 3rd best in Banking profitability according to IMF. Pakistan globally ranks 10th most active in perusing pro-business policies. The Infrastructure Industries Index in 2007 recorded a 26.2% growth in Industrial sector of Pakistan, with large-scale manufacturing growing at 11%. The Securities and Exchange Commission of Pakistan (SECP) registered 1,135 companies in first quarter of 2007. The IT industry registered a 50% growth.
Under President Musharraf, the government spent over $ 16.7 billion on poverty alleviation programs, and managed to reduce poverty from 35% in 2000-01 to 24% in 2006-07.
The Foreign Direct Investment that the President and the PM managed to attract back into the country is entirely due to their credibility, professional wisdom and personal interaction with the world. Their visionary plans predispose the world to trust them. FDI increased by $ 5.1 billion, for a year-on-year increase of 45.6%.
We as a nation should acknowledge Pakistan’s accelerating prominence in International relations, give credit open heartedly where something is achieved and criticize positively only to achieve something better. Cynicism and despondency should be avoided. Pakistan’s National interest should be held foremost and without compromise!
Afreen Baig is an independent analyst majoring in International Relations and Economics. She can be reached at firstname.lastname@example.org