PAKISTAN:ECONOMIC JOURNEY

1947-- 2024

NIZAM-E-MUSTAFA

ECONOMICS BASED ON DEBT ALONE

SARASIJ MAJUMDER

Pakistan was always dependent on someone else since its formation. Sometimes on USA, sometimes on China & sometimes on Gulf countries. All these countries helped Pakistan for their own interest. For example, USA helped Pakistan to counter India during Cold War. Pakistan duped USA in name of eliminating Taliban. China also used Pakistan for its GEO-POLITICAL gain, and launching  proxy war against INDIA. Gulf countries helped Pakistan in the name of Islam.

But instead of using this help to build the COUNTRY, Pakistan’s Political  leaders & establishments spent on terrorism, army, and practicing corruptions.

Back in the 1960s, Pakistan was richer than India & even China in terms of GDP per capita.  Now, it now is  one of the poorest country in ASIA, and even it’s economy is  comparable to  some poor countries in Africa.

Pakistan’s economy has collapsed  many times! The number will be between 20 and 30, depending on scale you select.

Pakistan’s economy  developed  much faster than other South Asian countries after  the independence, and particularly  under Gen. Ayub Khan's ‘Bureaucracy Supported Capitalism’.

It made sense that a country continually aided by the US & free from democratic red tape should do well economically. Ref. URL listed as ‘source-1’ for getting an idea of the amount it received from USA! It is staggering. But even then Pakistan became “BEGGER”

So, what went wrong?

If your first answer was terrorism, you aren’t wrong.Exporting terrorism is a very expensive obsession. Pakistan’s Geo-political obsession on Kashmir is its  main undoing.  But there is even more to it.

In its early days, Pakistan’s economic situation was much like India’s — the British had plundered the economy and left South Asia in the ruins after Colonial exploitation over almost 200 years—100 years by EIC, and 90 years by CROWN..

To tackle this, both India & Pakistan adopted the model of a ‘5-year plan’, inspired by the Soviet Union after impudence.

While India implemented this plan within a socialist set-up and GOAL, Pakistan, on the other hand, approached it very differently.

Amidst Cold War tensions, the USA initially tried to partner with India. A logical approach.

But Pseudo Socialist NEHRU refused to get associated with USA in any terms.

India followed a policy of non-alignment with a LEFTIST TILT,  and our LEFT CABAL, under inspiration from Nehru, started blaming the American way of capitalism.

 AMERICA (read CIA) had only option  to influence and operate in South Asia, and that was operating  through Pakistan. Pakistan accepted the proposal with both the hands.

By 1962, Pakistan had received $ 2.3 Bn. But it was coming in small amounts, every year, since 1950.

This inflow of Western wealth set Pakistan’s ECONOMY move  on  an upward spiral of GDP growth, and it grew at the rate of an astounding 5.82%, while India stagnated at a modest 4%.

But this growth was short lived — 1965 war dented a BLOW. What was left, went in  the Bangladesh War of 1971. Pakistan was dismembered and it’s economy got shattered.

And before 1971,  while Pakistan was suffering from political turmoil on its east end, the then Prime Minister Zulfiqar Ali Bhutto made matters worse by nationalizing key industries, banks, & educational institutions, following the footsteps of Mrs. Gandhi. I failed to understand why USA didn’t object to this.

Further, the global oil crisis of the 1970s triggered widespread inflation. Pakistan couldn’t escape.

The situation in the country seemed dire, as multiple economic avenues were compromised simultaneously. And it’s economy had little support from Manufacturing, or Service.

But to global surprise, Pakistan managed to turn the situation around in the subsequent decade.

When Gen. Zia-ul-Haq replaced PM Bhutto in 1978, he corrected much of Bhutto’s poor economic decisions.

He reversed the nationalization of institutions and deregulated the market, which let the private sector grow from approximately 30+% of GDP in 1980 to around 40+% by 1990.

Interestingly, banks were still kept under government control and operating  interest-free as per Islamic Rule.

This Was Part Of A Broader Initiative To Islamize Various Aspects Of Governance And Society, Known As Nizam-E-Mustafa Or The ‘Rule Of The Prophet’.

But despite his conservative doctrine, Zia employed technocrats to skilfully deploy the good economic policies.

Pakistan constantly was  in receipt of various AIDS from USA, & sometimes from Islamic countries, World Bank, and ADB, to shore up investment in the country—helped Armed forces, and this propped up their economy.

Along with a large inflow of remittances from the Pakistani diaspora, this allowed Pakistan’s economy to recover with an average GDP growth of 6.5% .

Pakistan this time befriended CHINA as all-weather support!

However, this growth only masked the fundamental flaws in Pakistan's weak economic FRAMEWORK  which crumbled shortly after.

While the stable Indian democracy and its leaders focused on long-term development and the protection of the domestic market, Pakistan continued to focus on short-term gains.

By the late1990s, Pakistan’s GDP growth rate again had plunged to 4.6%. USA also, closed the chain of its PAKISTAN PURSE.

But why did this happen if they were back on track again?

One of the major reasons was — Kashmir!

Like an one eyed DEER targeting the Kashmir  and fomenting the conflict, Pakistan let internal problems, like those in Sindh and Baluchistan,  allowed go unresolved, which gave rise to terrorism inside PAKISTAN.

This significantly impacted the Pakistani economy.

Pakistan has incurred substantial direct & indirect costs due to terrorism, estimated over $150.0 billion from 2001-2017.

Statistics also establish that internal terrorism negatively impacted FDI.

Per 1% increase in terrorism, FDI reduces by 0.104%. Along this trend, Pakistan misallocated funds by spending unreasonably on their defence sector. While Pakistan became the 9th strongest military in the world, it was achieved at the expense of overall development and it was slipping downwards on economic front. Its economic rank slipped down to 45 globally.

While Pakistan was entangled in these matters, India focused on domestic development and harmony.

In fact, the Indian govt was concentrated on establishing world-class institutions like IITs, IIMs and AIIMS to invest in India’s human resource. This led India to become one of the most sought-after countries to invest in.

On the other hand, Pakistan’s constant political instability eroded investors’ confidence and made the country vulnerable to uncertainty from all point of view. International  Cricket teams were not ready to visit and play in  Pakistan.

Pakistan’s LOSS was India’s GAIN .

This shortsightedness even led to unserviceable Fiscal Deficit.

The Pakistani govt does not earn enough to support its everyday functioning.

To finance its operations, the govt has to rely on external debt—Pakistan owed over $126 Bn to foreign creditors as of 2022. A high fiscal deficit is an indicator of a poor economy.

Debt Servicing Costs:

A large part of govt revenue is used to service the existing debt, both domestic and foreign. As debt levels have risen, so have interest payments, creating a vicious cycle of borrowing to repay loans.

Trade Deficit:

Historically, Pakistan’s imports always  have exceeded its exports by a big margin.

This imbalance has led to a significant depreciation of the Pakistani rupee, leaving them vulnerable to foreign trade. BUT, the biggest danger to Pakistan’s economy is its lack of productivity.

Productivity refers to the ratio of output produced per unit of input used.

And here's how it has impacted Pakistan:

👉🏼 Labour Productivity: Measured as GDP per worker, it is alarmingly low in Pakistan compared to India and Bangladesh.

This implies that Pakistani citizens do not work efficiently enough to drive the needed economic growth. The primary reason for this is the lack of investment in health and education. MADRASA based education can generate JIHADIS, but not skilled and productive workers.

So now, India benefitted from the liberalization in the 1990s due to a strong economic foundation and China is projected to even surpass the US economy by 2030. I doubt it may have surpassed already. China’s currency may be kept artificially undervalued to promote EXPORT.

Pakistan is also maintaining a very expensive ARMED FORCES.

From April 2023 to June 2026, Pakistan needs to repay $77.5 billion in external debt. For a $350 billion economy, this is a hefty burden.

Pakistan's GDP growth is expected at 1.9% in 2024 and 2.8% in 2025 –Pakistan's inflation rates forecasted at 25.0% in 2024----- Asia Development Bank

Pakistan’s economy today is gasping to survive due to a series of reckless economic policies, GEO-POLITICAL OBSESSION, and defence oriented expenses.

Now Pakistan  Made DEBT Based Economy, Taking, And Servicing,  It’s The National Policy.

NOTE: BLOGGER visited LAHORE twice in Nineties, and collected information used in this article also. Analysis, and opinion—BLOGGER.

Disclaimer:- This BLOG is shared for information purpose only. Not to insult any person, or any country, or any religion.

Sources:- Data, and Information.

1.0 https://www.theguardian.com/global-development/poverty-matters/2011/jul/11/us-aid-to-pakistan

2.0 Statista.com. { ALL DATA TAKEN FROM THIS SITE}

3.0 https://sites.lsa.umich.edu/mje/2024/04/17/the-struggles-of-the-pakistani-economy/

4.0 https://sites.lsa.umich.edu/mje/2024/04/17/the-struggles-of-the-pakistani-economy/

5.0 Old articles from ‘DAWN’---{DAWN.COM}

6.0 https://country.eiu.com/pakistan