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Pakistan: a forgotten economy

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Dr Ashfaque H Khan

Until 2007, Pakistan was regarded as one of the four fastest growing economies in Asia, the others being China, India and Vietnam. Goldman Sachs, an international investment bank, included Pakistan, along with Mexico, South Korea and Vietnam, in the club of the “Next Eleven” (N-11), on the basis of their potentials to emerge as major economic powers.
But in just three years, the Pakistani economy has ceased to be of interest to international forums.
At the recently concluded G20 Summit in Seoul, the United Nations Economic and Social Commission of Asia and the Pacific set up an experts’ group to present the Asia-Pacific perspective on the current global economic challenges,. I was one of the members of the group assigned the responsibility to prepare the views of the Asia-Pacific region. The group discussed the economies of countries including Bangladesh, Sri Lanka, Laos, Cambodia and Vietnam. Pakistan’s economy never made it to this particular discussion agenda.
Pakistan, the seventh most populous country in the world with its 168 million people, has a $175-billion economy. Most importantly, it is a nuclear power. But it was totally overlooked as an economy. It was especially painful for me, as someone who has been part of Pakistan’s erstwhile success, to witness this country being given the cold shoulder.
However, through his constructive engagement with other participants, Mr Sohail Mahmood, the Pakistani ambassador to Thailand, kept the country’s name alive at that international forum. Well-prepared and fully aware of the issues afflicting the global economy, he was able to contribute extensively to the deliberation. It is a comfort to know that such islands of excellence exist in Pakistan.
Until 2007, the Pakistani economy was experiencing robust growth. It witnessed the longest spell of strong growth during the first seven years (2000-07) of the decade. With an economic growth averaging 7.0 per cent per annum for most of this period, Pakistan succeeded in reducing poverty by half. Inequality and unemployment registered a decline and the private sector was buoyant. Exports and imports were growing at higher double-digits and the country’s debt burden was reduced to half. Foreign exchange reserves remained at a comfortable level and provided stability to the exchange rate. Foreign investment was pouring in, reaching as high as $8.4 billion, or six per cent of the GDP. International rating agencies continued to improve Pakistan’s credit rating, the country exited from the IMF Programme and re-entered the international capital and equity markets.
How has that economy been transformed into a forgotten one in just three years? Unfortunately, the economy never featured on the radar screen of the present government. Additionally, the government lacked a credible economic team. In less than three years there have been four finance ministers, four finance secretaries and three governors of the State Bank.
The government wasted time and energy in downplaying the achievements of the previous government, while it lurched from one crisis to another, a rudderless ship with no sense of direction and purpose. The current economic team is weak and lacks the capacity to handle the multidimensional challenges it is confronted with, most of which are self-created.
The country’s economic growth has slowed to an average of three per cent per annum, and unemployment and poverty have risen. Higher double-digit inflation has persisted and items of basic necessity have gone beyond the reach of the common man. The debt burden has reached unsustainable levels and the dependence on donors has grown. Clearly, three years of mis-governance and poor economic management have brought the economy to near-standstill. People have lost confidence in the country’s ability to recover from the ever-deepening economic crisis. The recent unprecedented floods have further aggravated the impact of the economic ills.
It is not only the economy which is in decline. This is true of things in every walk of life. To name just a few, this has been evident in the game of cricket, the inaugural parade at the Commonwealth Games, the Haj operations, the creation of the sugar crisis, the running of public-sector enterprises like PIA, Pakistan Railways, the Steel Mills, National Insurance Corporation and TCP, the crisis in higher education, the deterioration in law and order and the debacle of the recently concluded Pakistan Development Forum (PDF).
The PDF meeting requires special mention. The PDF, the reincarnation of the Aid to Pakistan Consortium, is jointly chaired by the World Bank and the Government of Pakistan, represented through its finance minister. The purpose of this forum is to provide a platform to the government where it can present its economic and social reforms agenda before visiting delegations. The PDF has never been a platform for pledging assistance. Unfortunately, this forum was transformed into a pledging forum because every minister, even the prime minister, made statements about the financial loss caused by the floods and asked for financial support. The minister of interior even pleaded for a debt write-off.
It is unfortunate that we have turned every international forum, including Friends of Democratic Pakistan (FODP), into an opportunity for begging. No self-respecting nation begs forever. A beggar cannot command respect in the comity of nation. Continuing to do so, Pakistan risks nothing less than global oblivion. How long can we keep on begging like this? Is this the fate to which the people of Pakistan must resign themselves?

The writer is director general and dean at NUST Business School, Islamabad.

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