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July 15, 2019

Economic history of Pakistan: Part - I

Opinion

July 15, 2019

The economic policies announced by the new government, and the measures taken since June for making a ‘Naya Pakistan’, have destabilized the economy of the country.

All sections of society – rich or poor, industrialist or middle class – are deeply worried and restless as a result of the new fiscal policies. The public is uncertain about the economic difficulties awaiting them in the new financial year.

The government’s economic experts are merely implementers of the economic policies of international financial institutions. Beside what has already been borrowed, about $10 billion is in the pipeline.

The implementation of the first regular Federal Budget for 2019/2020 which was passed by the National Assembly has come into force, despite strong opposition to its provisions. The IMF approved a $6 billion bailout Extended Fund Facility, of which the first tranche of $1 billion has been received.

The disbursement of cash loans from friendly countries has taken place and the supply of petroleum against deferred payment started from July 1. Under the ‘Assets Declaration Scheme’ and in an atmosphere of fear and retribution, about Rs65 billion has been received as revenue on a discounted rate of taxation for ‘benami’ assets declared. In addition, over 100,000 new tax filers have filed tax returns.

Despite the host of measures taken by the government to meet the fiscal and foreign exchange deficit and despite the untiring efforts of the government’s economic team to justify these measures, all segments of society are gravely worried; worried about increasing inflation, the upward adjustment of the rupee against the dollar on an almost daily basis, the falling prices of stocks in the stock market and the virtually dormant real estate market.

There is a pervasive fear that, as the conditions of the IMF programme unfold during the current financial year, conditions for the people may deteriorate even further. There is talk about the dollarization of the economy. The explanations given by the government’s economic management team have failed to pacify citizens and there are reports of demonstrations and protests from various Chambers of Commerce and Industry and other trade and public bodies.

It is our national misfortune that, since Independence in 1947, our national economy has always remained unstable and dependent on foreign assistance. We have been unable to achieve economic independence and self-reliance even after seven decades. All successive governments have always looked for grants and dole-outs.

There have been some short periods of economic growth during these 70 years (as during the Ayub era) but due to the overwhelmingly faulty economic planning, policies and programmes, the health of the country’s economy has worsened and self-reliance and economic growth have failed to keep pace with the growing population.

During the sixties, the economy of united Pakistan was growing at an average rate of 6.8 percent per annum. During the seventies, this rate dropped to 4.8 percent per annum while the population increased from 65 million to 85 million, bringing with it multiplying difficulties for the people.

At the end of the sixties and beginning seventies, protests and sloganeering started aimed at damaging the earlier economic gains. Concentration of wealth in the hands of 22 families became a popular political outcry. Instruments like Bonus Vouchers, import-export licensing and resultant multiple exchange rates were vehemently criticized. Loans extended by financial institutions such as PICIC, ADBP, ICP, NIT, etc to set up new industrial units were also perceived as responsible for spreading corruption in society.

The agricultural and industrial progress achieved during the government of Field Marshal Ayub Khan was ignored. The Pakistan People’s Party, the political party that came into power for the first time, held Ayub Khan responsible for all the economic woes they inherited. In this unstable and uncertain political atmosphere, the responsibility to revive the national economy was assigned to Dr Mubashar Hassan in December 1971. He held the important portfolios of minister of finance and minister of planning and development until October 1974.

Dr Mubashar Hassan (who is now 97 years old; may the Almighty give him long life and good health – Ameen) obtained a BSc degree in Civil Engineering from Punjab University in 1947. He later obtained MSc and PhD degrees from Iowa University and Columbia University in the US in civil engineering and hydraulic engineering respectively. After returning, he taught at UET, Lahore and was held in great esteem as a devoted and accomplished teacher of civil engineering.

In 1967, when he co-founded the Pakistan People’s Party with Mr Zulfikar Ali Bhutto and Mr J A Rahim, he became exposed to the vagaries of politics and from there his influence in the making (or unmaking) of the economic policies of Pakistan started. This period came to an end with the fall of the PPP government in 1977.

During this period, private-sector industrial units in basic industrial sectors, including steel and chemicals, were nationalized in the name of economic reforms and progress and many civil servants were removed/retired on various charges. The nationalized units were handed over to the very bureaucracy that was earlier criticized for wrongdoings. Many of those offering resistance were put behind bars. Many of these public assets were misused with impunity, with irreparable financial loss to the treasury; thus started the process of huge losses to public sector enterprises, which continues even today.

The negative results of these actions soon became apparent and the government was forced to revert many units to the private sector. To this day it is not clear who the real architect of nationalization was.

The various steps curbing the private-sector initiative and the handing over of industrial and corporate assets resulted in the fall of overall economic growth. Many entrepreneurs moved abroad and instead of creating new employment opportunities, jobs declined.

To be continued

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