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PRESENTED BY: GROUP

1
AN OVERVIEW

Economic and social outcomes in Pakistan over the last


sixty years are a mixture of paradoxes.
Pakistani economy grew at rate of 6 percent per year
through its first four decades.
In spite of rapid population growth during this period, per
capita incomes doubled, inflation remained low and
poverty declined from 46% down to 18% by late 1980s.
However, things started to go downhill since the decade
of 1990s.
PERIOD I: THE FLAT FIFTIES (1947 TO 1958)

The First Five yearly Plan


Started by MOF and developed
by ECC
The plan was based on the theory
of Cost of Production value, and
also covered the areas of Trickle-
Down economic system.
State Bank Of Pakistan was
Started
THE END OF THE FIRST PERIOD

Currency War with India till the early 50s but was
resolved in mid 50s and trade resumed.
Start of the Korean War which led to a boom in
local economies.
However the growth was retarded by the
assassination of Liaqat Ali Khan in 1951.
In 1953, the plan collapsed altogether due to
lack of funds.
In the end, Prime Minister Khawaja Nazimuddin
was forced to end the program.
CONTINUED
In 1955, Prime ministerMuhammad Ali Bograagain
revived the plan and published in 1956.
Agricultural development given the highest priority and
270 Million Rupees spent on both East and West Pakistan
combined.
However due to the lack of technical knowledge,
inadequate personnel and shortage of foreign exchange
funds the program collapsed.
Coupled with political tension regarding inequality among
provinces and the influx of refugees, Pakistan faced a
huge economic problem.
PERIOD II:THE GOLDEN SIXTIES (1958 TO 1969)
Ayub Khan took control of Pakistan in 1958 and
despite its poor past performance, revived the five
year plans.(with some additional help)
The second five-year plans gave highest priority to
heavy industrial development, advancement in
literature and science.
GDP growth in this decade jumped to an average
annual rate of 6 percent from 3 percent in the
1950s.
The manufacturing sector expanded by 9 percent
annually and the agricultural sector growth was 4
percent due to the green revolution.
CONTINUED
Perception of inequalities rose along with the concentration of wealth
among the 22 families.
But How?
Result: Pakistans main industries were producing negative value added
goods.
Hence, in spite of import substitution and large amounts of exports,
foreign exchange shortages persisted.
The failure of the economic elite to save out of their increased income
resulted during the 1960s in a seven-fold increase in the requirement of
foreign aid.
Debt servicing as a percentage of total foreign exchange earnings
increased from 4.2% in 1960-61 to 34.5% by 1971-72
THE END OF AYUBS REGIME

Due to dissatisfaction of East Pakistan, tensions


arose. Sheikh Mujib Ur Rehman escalated the
problem leading to his arrest and trial.
In the end, the war broke out with east Pakistan
and India straining the Treasury even more.
East Pakistan gained independence and Ayub
lost his power and position to General Yahya
Khan.
At this time, internationally, Pakistans did not
look good.
PERIOD III:THE SOCIALIST SEVENTIES (1971 TO 1977)
Zulfiqar Ali Bhutto became Pakistans prime minister in
1973 and introduced socialist economic reforms.(Policy
of nationalization)
Nationalized 43 large industrial units in the capital and
intermediate goods sectors. Later on, nationalized
cooking oil, flour, cotton and rice industries.
Does this really spell out equity?
There was a decline in total private sector investment
as a percentage of GDP during this period but it was
more than compensated by an increase in total public
sector investment.
Thus the overall investment/GDP ratio during the
Bhutto period reached 15.5 percent.
FURTHERMORE
Yet the growth rate of GDP declined from 6.3
percent in the period 1960-1973 to 5 percent in
the period 1973-77.
This is indicative of a decline in the productivity of
investment, which was caused by two sets of
factors:
1)Concentration of public sector investment in the
unproductive sectors of defense and
administration.
2) economically inefficient investment decisions
in the public sector industries based on political
considerations.
Hence, the budget deficit increased.
IN THE END

Double burden on people:


1. Reduction in the development
expenditure, which slowed down
employment.
2. Sharply increased inflation rates
further constricted the real income of
middle class households
.In the end, his policies produced
resentment among citizens which led
to demonstrations and the end of his
power.
PERIOD IV: THE REVIVALIST EIGHTIES (1977 TO 1988)

After Bhutto, General Zia Ul Haq came into power at


a time when the GDP growth was slowed down and
Pakistan was facing growing debt.
However, help came in the form of two factors:
1. Generous financial support from the west for the
covert Soviet War
2. The acceleration in the inflow of remittances from
the Middle East which increased from US $ 0.5 billion
in 1978 to US $ 3.2 billion in 1984.
. How do they help?
. Increased GDP from 4.9% to 6.6%.
CONTINUED

This growth was unexpected because of the following factors:


1)The domestic savings rate continued to remain below 10%
compared to a required rate of over 20%.Why?
2)Exports as a percentage of GDP continued to remain below 10%
and did not register any substantial increase.
3)Inadequate investment in social and economic infrastructure.
Higher percentage of expenditure on defence and debt servicing.
ANOTHER UNFORTUNATE END

The war ended and the turmoil began.


Debt servicing pressures resulted from the
low savings rates
Balance of payments deficits resulted with
low export growth
And poor infrastructure, combined to pull
down the GDP growth into a protracted
economic recession in the 1990s.
PERIOD V:THE MUDDLING NINETIES (1988 TO 1999)

Benazir Bhutto won the General Elections of 1988


Political Instability
The annual growth rate during the 1980s was 6.3% which
decreased to 4% in 1990s. Why?
Pakistan's credibility in the international financial
community was low
The investment ratio fell to 13.9 percent during 1998 and
1999
The persistence of fiscal and external deficits led to
accumulation of large domestic and external debt
throughout the decade. Total debt consequently rose from
$20 billion in June 1990 to a peak of $43 billion in May 1998
Seventh five yearly plan
DEBT TO GDP RATIO
ERA OF ECONOMIC STAGFLATION

Pressler Amendment

Country failed to attract the foreign investors

to boost the economy


Benazirs response?

Tax reforms

This led the dismissal of Benazir Bhutto's

government, and the return ofNawaz Sharif


PERIOD VI: THE REFORMING HUNDREDS (1999 TO
2007)

The challenge faced by the Military Government was external

liquidity problem
Pakistan had to enter into a stand-by arrangement with the

IMF: PRGF
During the years 1999 to 2004 the economy was able to

achieve the following results:


Fiscal deficit was reduced from 5.4 to 4.3 percent of GDP

Exports increased from $ 7.8 billion to $ 9.2 billion

GDP grew from 4.2% to 6.4%


CHANGES IN KEY MACROECONOMIC INDICATORS
CONTINUED
The situation worsened after December

2007
External conditions worsened the

problem
Economic Regress 2008:

Decline in GDP growth

Shortfall of cotton and rice crops

Relative slowdown in foreign inflows to

Pakistan
PAKISTAN TODAY

Pakistans economy continues to maintain its


growth with real GDP growing at 4.71% in
2016.
The external sector has become more stable.
The construction related activities will gain
further momentum under CPEC.
The budget deficit has witnessed a
substantial decline from 8.2% of GDP in 2013
to 5.3% in 2016.
THANK YOU!

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