Economic history of Pakistan
Since
Historically, the land forming modern-day Pakistan was home to the ancient
Overall, Pakistan has maintained a fairly healthy and functional economy in the face of several wars, changing demographics, and transfers of power between civilian and military regimes, growing at an impressive rate of 6 percent per annum in the first four decades of its existence. During the 1960s, Pakistan was seen as a model of economic development around the world, and there was much praise for its rapid progress. Many countries sought to emulate Pakistan's economic planning strategy, including South Korea, which replicated the city of Karachi's second "Five-Year Plan."
Ancient history
Indus Valley Civilization
The
Although civilization had several urban centers, much of the population resided in villages, where the economy was largely isolated and self-sustaining. Agriculture was the predominant occupation, as it helped satisfy the villages' food requirements while also providing raw materials for cottage and small scale industries like textiles and handicrafts. Besides farmers, other occupational groups included barbers, carpenters, doctors (Ayurvedic practitioners), goldsmiths, weavers, etc.[5]
Through the
Achaemenid Empire
In 518 BCE, The Achaemenid Empire conquered regions of modern day's Pakistan. The conquered area was the most fertile and populous region of the Achaemenid Empire. An amount of tribute was fixed according to the richness of each territory.[7][8] The province of the Hindush ('Ινδοι, Indoi) was the Achaemenid district paying the largest tribute, and alone represented 32% of the total tribute revenues of the whole Achaemenid Empire.[7][8] It also means that Indos was the richest Achaemenid region in the subcontinent, much richer than Gandara or Sattagydia.
Mauryan Empire
During the Maurya Empire (c. 321–185 BC), there were a number of important changes and developments in the economy of the region. For the first time, most of Indian subcontinent was unified under one ruler. With an empire in place, trade routes became more secure, thereby reducing the risks associated with the transportation of goods. The empire spent considerable resources building roads and maintaining them throughout the region. The improved infrastructure, combined with greater security, uniformity in measurements, and the increasing usage of coins as currency, all enhanced trade.[9]
Kushan Empire
After Mauryan Empire, the region came under control of Indo-Greek Kingdom, under which economy was rather vibrant as evident by their coins, art and architecture.[10][11] Afterwards Kushan Empire gained control in 1st century AD and the region prospered under them.
Medieval history
Delhi Sultanate
Many historians argue that the Delhi Sultanate was responsible for making Indian subcontinent more multicultural and cosmopolitan. According to Angus Maddison, between the years 1000 and 1500, region's GDP, of which the sultanates represented a significant part, grew nearly 80% to $60.5 billion in 1500.[12]
Mughal Empire
During the Mughal period (1526–1858) in the 16th century, the gross domestic product of the empire was estimated at about 25.1% of the world economy.
An estimate of Indian subcontinent's pre-colonial economy puts the annual revenue of Emperor Akbar's treasury in 1600 at £17.5 million (in contrast to the entire treasury of Great Britain two hundred years later in 1800, which totaled £16 million). The gross domestic product of Mughal Empire in 1600 was estimated at about 24.3 percent of the world economy, making it the second largest in the world.[13]
By the late 17th century, the Mughal Empire was at its peak and had expanded to include almost 90 percent of South Asia. In 1700, the exchequer of the Emperor Aurangzeb reported an annual revenue of more than £100 million. Mughal India was now the world's largest economy, responsible for almost a quarter of global production, as well as a sophisticated customs and taxation system within the empire.
Silk route
scholars have suggested that trading from Indian subcontinent to West Asia and Eastern Europe was active between the 14th and 18th centuries.[14][15][16] During this period,local traders settled in Surakhani, a suburb of greater Baku, Azerbaijan.
Further north, the
Colonial history
After gaining the right to collect revenue in Bengal in 1765, the East India Company largely ceased importing gold[19] and silver, which it had hitherto used to pay for goods shipped back to Britain.[20] In addition, as under Mughal rule, land revenue collected in the Bengal Presidency helped finance the company's wars in other part of Indian subcontinent.[20]
During the period 1780–1860, region's status shifted from being an exporter of processed goods for which it received payment in
While
The British economic policies were most obvious in
Post-independence history
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Pakistan's population has grown rapidly from around 30 million in 1947 to over 220 million in 2020. Despite this, Pakistan's average
1950s and 1960s: Initial decades
Economic growth during the 1950s averaged 3.1 percent per annum, and the decade was marked by both political and macroeconomic instability and a shortage of resources to meet the nation's needs. After the State Bank of Pakistan was founded in 1948, a currency dispute between India and Pakistan broke out in 1949. Trade relations were strained until the issue was resolved in mid-1950. Monsoon floods between 1951–52 and 1952-53 created further economic problems, as did uneven development between East and West Pakistan.
Pakistan's economy was quickly revitalized under
Along with heavy investment in manufacturing, Ayub's policies focused on boosting Pakistan's agricultural sector. Land reforms, the consolidation of holdings, and strict measures against hoarding were combined with rural credit programs and work programs, higher procurement prices, augmented allocations for agriculture, and improved seeds as part of the
Some academics have argued that while HYV technology enabled a sharp acceleration in agricultural growth, it was accompanied by social polarization and increased interpersonal and interregional inequality.[29] Mahbub ul Haq blamed the concentration of economic power to 22 families who were dominating the financial and economic life of the country by controlling 66 percent of industrial assets and 87 percent of banking.[30]
In 1959, the country began the construction of its new capital city.
Economy of East Bengal in Pakistan
The partition of British India and the emergence of India and Pakistan in 1947 severely disrupted the country's economic system. The united government of Pakistan expanded its cultivated area and some irrigation facilities, but the rural population generally became poorer between 1947 and 1971 because improvements did not keep pace with the rural population increase.[34] Pakistan's five-year plans opted for a development strategy based on industrialization, but the major share of the development budget went to West Pakistan, that is, contemporary Pakistan.[34] A lack of natural resources meant that East Pakistan was heavily dependent on imports, creating a balance of payments problem.[34] Without a substantial industrialization program or adequate agrarian expansion, the economy of East Pakistan steadily declined.[34] Blame was placed by various observers, but especially by those in East Pakistan, on the West Pakistani leaders who not only dominated the government, but also most of the fledgling industries in East Pakistan.[34]
1970s: Nationalization and command economy
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Tarbela Dam, the largest earth filled dam in the world, was constructed in 1968.
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Prime Minister Secretariat in the new capital city
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Spread over 1700 acres, Quaid-i-Azam University was constructed in 1967.
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Pakistan Steel Mills was constructed in 1973, making it the largest industrial mega-corporation, having a production capacity of 5.0 million tonnes of steel.
Economic mismanagement in general, and fiscally imprudent economic policies in particular, caused a large increase in the country's public debt and led to slower growth in the 1970s. Two wars with
According to Muhammad Abrar Zahoor, the nationalization of industries can be divided into two phases. The first phase started soon after the PPP came into power and was motivated by distributional concerns – to bring under state control the financial and physical capital controlled by a tiny corporate elite. However, in 1974, the influence and authority of the left wing within the party significantly decreased: they had either been marginalized or purged.5 As a result, the second phase was less ideologically motivated, and was instead driven by the outcome of ad hoc responses to various situations.6 Between 1974 and 1976, the style of economic management Bhutto adopted reduced the role of the Planning Commission as well as its capacity to offer advice to political decision-makers. Corruption grew exponentially and access to state corridors became a primary avenue of accumulating a private fortune. In this way, groups and individuals in command of state institutions used public intervention in the economy "as a means for extending their wealth and power."[37]
Bhutto introduced
1980s-1999: Era of privatization and stagnation
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Pakistan developed the first motorway in South Asia in 1997; today it has expanded to a 1,502 km long network.
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The Soviet–Afghan War significantly affected the economy of Pakistan, with approximately 1.7 million Afghani refugees moving to Pakistan.
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Benazir Bhutto twice led the country during this period and promoted social-capitalist policies.
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Jinnah International Airport was greatly expanded in 1994, making it a regional aviation hub.
Periods | GDP growth rate↓ (according to Sartaj Aziz) |
Inflation rate↑ (according to Sartaj Aziz) |
---|---|---|
1988-89 | 4.88%[39] | 10.39%[39] |
1989-90 | 4.67%[39] | 6.04%[39] |
1990-91 | 5.48%[39] | 12.66%[39] |
1991-92 | 7.68%[39] | 9.62%[39] |
1992-93 | 3.03%[39] | 11.66%[39] |
1993-94 | 4.0%[39] | 11.80%[39] |
1994-95 | 4.5%[39] | 14.5%[39] |
1995-96 | 1.70% | 10.79%[40] |
Pakistan's economy recovered significantly during the 1980s via a policy of deregulation, as well as an increased inflow of foreign aid and remittances from expatriate workers. Under Muhammad Zia-ul-Haq, "many of the controls on industry were liberalized or abolished, the balance of payments deficit was kept under control, and Pakistan became self-sufficient in all basic foodstuffs with the exception of edible oils."[38] As a result, Pakistan's rate of GDP growth rose to an average of 6.5 percent per annum in the 1980s. According to Sushil Khanna,[41] professor at the Indian Institute of Mass Communication, the completion of the long gestation period of Tarbela Dam also helped unleash unprecedented agricultural growth, while fertilizer and cement investments made in the 1970s contributed to industrial growth. A tremendous boost to economic activity was provided by rising worker remittances, which reached a peak of US$3 billion in 1982–83, equivalent to 10 percent of the gross national product of Pakistan. Zia also successfully negotiated with the United States for larger external assistance. In addition to supplying direct aid to Pakistan, the U.S. and its allies funneled about US$5–7 billion to the Afghan Mujahideen through Pakistan, further uplifting the local economy. Under Zia, economic policies became market oriented, rather than socialist.[42]
Pakistan's economy in the 1990s suffered from poor governance and low growth as it alternated between the
. The GDP growth rate sank to 4 percent and Pakistan faced persistent fiscal and external deficits, triggering a debt crisis. Exports stagnated and Pakistan lost its market share in a buoyant world trade environment. Poverty nearly doubled from 18 to 34 percent, causing the Human Development Index of the United Nations Development Programme to rank Pakistan in one of its lowest development categories during this time period.While both the Nawaz Sharif and Benazir Bhutto governments supported economic
2000s: Economic liberalization, growth and re-stagnation
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JF-17 Thunderbecame the first indigenous combat aircraft produced by the country.
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The poverty expenditure rate statistically dropped to 34.5%—17.2% in 2008 as part of the privatization programme.
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PTCL was privatized in 2005, and boosted revenue of over $1 billion.
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Statue of a bull outside Islamabad Stock Exchange
Following a military coup in October 1999, Pervez Musharraf became the President of Pakistan in 2001 and worked to address the challenges of "heavy external and domestic indebtedness; high fiscal deficit and low revenue generation capacity; rising poverty and unemployment; and a weak balance of payments with stagnant exports."[38] At this time, the country lacked the foreign exchange reserves needed to cover its imports or service its debts, remittances and investments had decreased by millions, and Pakistan had no access to private capital markets.[citation needed]
Yet, sound structural policies coupled with improved economic management accelerated growth between 2002 and 2007. Approximately 11.8 million new jobs were created during Musharraf's term from 1999 to 2008, while primary school enrollment rose and the debt-to-GDP ratio dropped from 100 to 55 percent. Pakistan's reserves increased from US$1.2 billion in October 1999 to US$10.7 billion on 30 June 2004. The rate of inflation fell, while the investment rate grew to 23 percent of GDP, and an estimated $14 billion of foreign private capital inflows financed many sectors of the economy. The exchange rate also remained fairly stable throughout this period. All revenue collection targets were met on time and allocation for development was increased by about 40 percent.]
After Musharraf's resignation in 2008 due to mounting legal and public pressures, the PPP government once again resumed control of Pakistan. The administrations of
2010s: Privatization and liberalization
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3000 km long China–Pakistan Economic Corridor construction began in 2015.
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Pakistan rolled out 4G in 2014, aiming to capitalize on over 140 million mobile phones in the country.
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Several mass transit systems have been developed throughout Pakistan.
Fiscal year | GDP growth | Inflation rate |
---|---|---|
2013–14[50] | 4.14%[51] | 8.5%[52] |
2014–15 | 4.24% | 4.8%[53] |
2015–16 | 4.5% Projected[54] | 5.1%[53] |
In 2013, Nawaz Sharif returned to inherit an economy crippled by energy shortages,
The IMF loan program concluded in September 2016. Although Pakistan missed several structural reform criteria, it restored macroeconomic stability, improved its credit rating, and boosted growth. The Pakistani rupee has remained relatively stable against the US dollar since 2015, though it declined about 10 percent between November 2017 and March 2018.[1] Balance of payments concerns have also reemerged as a result of a significant increase in imports and weak export and remittance growth. In its South Asian Growth report, the World Bank stated: "In Pakistan, gradual recovery to around 4.5 per cent growth by 2016 is aided by low inflation and fiscal consolidation. Increases in remittances and stable agricultural performance contribute to this outcome. But further acceleration requires tackling pervasive power cuts, a cumbersome business environment, and low access to finance."[60] In his 2016 book, The Rise and Fall of Nations, Ruchir Sharma opined that Pakistan's economy is in its 'take-off' stage and termed the future outlook for 2020 'very good,’ predicting that Pakistan would transform from a "low-income to a middle-income country during the next five years."[61]
In 2016, articles by Forbes and Reuters declared Pakistan's economy to be on track to becoming an emerging market in Asia, and affirmed that Pakistan's expanding middle class is key to the country's economic prospects.[62][63] On 7 November 2016, Bloomberg News also claimed that "Pakistan is on the verge of an investment-led growth cycle."[64] On 10 January 2017, The Economist forecasted Pakistan's GDP to grow at 5.3 percent in 2017, making it the fifth fastest growing economy in the world and the fastest growing in the Muslim world.[65][66]
2022-2023 Pakistani economic crisis
This section needs to be updated.(March 2023) |
Due to the
This combined with factors like poor governance, low productivity per capita and the 2022 Pakistan Floods resulted in a balance of payment crisis.[70] This has triggered the country taking desperate steps to persuade IMF to resume its $6 Billion bailout deal.[71]
See also
- Economy of Pakistan
- Belt and Road Initiative
- Foreign aid to Pakistan
- China–Pakistan Economic Corridor
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- ^ HIGHLIGHTS OF PAKISTAN ECONOMIC SURVEY 2013-14
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- ^ a b Economic Survey 2014-15: Ishaq Dar touts economic growth amidst missed targets
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Works cited
- Peers, Douglas M. (2006), India under Colonial Rule 1700–1885, Harlow and London: Pearson Longmans, ISBN 978-0582317383.
- Raychaudhuri, Tapan; ISBN 978-81-250-2709-6.
- Robb, Peter (2004), A History of India (Palgrave Essential Histories), Houndmills, Hampshire: Palgrave Macmillan, ISBN 978-0-333-69129-8.