Lecture-01 onwards-Brief history of economic development of Pakistan.pptx

The economy is a complex system encompassing the production, distribution, and consumption of goods and services within a society. It is driven by various factors, including labor, capital, resources, and technological advancements. Economic activities are influenced by policies set by governments and institutions, which aim to balance growth, inflation, and employment. Market dynamics, such as supply and demand, also play a crucial role in determining prices and resource allocation. The health of an economy is often measured by indicators like GDP, unemployment rates, and inflation, which provide insights into its performance and stability. Understanding economic principles is essential for making informed decisions in both public and private sectors.

1. Brief History of Economic Development of Pakistan Lecture No : 02 1

2. First Part Historical overview of economy of Pakistan S econd Part Current situation of economy of Pakistan 2

3. Outline Pre-independence history Different economic eras Structural changes in Pakistan

4. 4 Colony The role of colony to British empire How British ensure their power in colony Its impact on Pakistan economy 4

5. 75 years of development laying the Foundations:1947-1958 Major features Predominantly agrarian nature U ndeveloped and newly independent nation Little industrial structure, few services and no infrastructure Adverse international conditions and precarious domestic situation Lack of capital Trade surplus Attempts to keep Pakistan on its feet 5

6. The decade of economic development:1958-1968 Economic achievements Considerable economic growth and development Significant improvements in industrial and agriculture production Capitalist economy model High growth rate in manufacturing sector Increase in exports and relatively less imports Progress in agriculture sector 6

7. The decade of economic development:1958-1968...continued Policy failures Increasing disparities in incomes Concentration of economic prosperity Negligence of social sectors Little or no increase in real wages Trade restrictions Distortion of local markets Overvaluation of exchange rate 7

8. The bad Luck Years:1971-1977 Economic achievements Foundations for future economic growth and development Establishment of basic industries Base for a capital goods industry Middle East economic boom Illiberal economic policies Foreign exchange earnings from devaluation 8

9. The bad Luck Years:1971-1977…Continued Economic failures Some events beyond control affected economic program of this era Downward trend in economic growth Process of Nationalization Cotton crops failure Natural disasters including floods E xports Crisis B alance of payments issue Devaluation of Pakistani rupee 9

10. The second Military Government 1977-1988 Economic achievements Liberalization of macroeconomic policies Relatively higher industrial growth E conomic revolution due to foreign remittances Foreign aid Emergence of middle class, etc etc 10

11. The second Military Government 1977-1988… continued… Economic policy failures Socio-economic impact of Martial law Politico-economic instability in Pakistan Confusion of economic policies Underutilization of economic resources including foreign aid and remittances 11

12. The Era of Structural Adjustment:1988-1998 Major economic achievements Return of political democracy Era of structural adjustment Economic liberalization and stabilization Process of Privatization Decease in tariff rates Fiscal deficit reduction to 4% of GDP High taxation and reduced public expenditure Indirect taxes imposed and instead of decreasing non development or defense expenditure, development budget decreased Continuous rise in prices of utilities (gas, electricity, and petrol) Selling off state owned enterprises Devaluation of Pak rupee 12

13. Major Policy Failures Macro economic crisis High taxation Low spending in social sectors Trade reforms and deindustrialization Continuous devaluation of the Pakistani rupee Increased in the administrated prices of utilities High inflation & Unemployment Privatization without proper policy 13 The Era of Structural Adjustment:1988-1998…continued…

14. macroeconomic situation:1998-2004 Salient features Increase in economic growth Rise in industrial production Increase in exports earnings Strong upsurge in domestic investment Pre-payment of high cost external debt Rise of foreign exchange reserves Strategic re-entry into the international capital markets Increase in spending on education Increase in FDI 14

15. The economy in FY2005-FY2007 GDP growth at over 8.4% for the first time in 8 years Sound macroeconomic fundamentals Strengthening of key sector by economic reforms implemented in the 4-5 years Average economic growth around 7% 15

16. Structural changes in Pakistan C hanges in levels of some basic magnitudes are generally associated with changes in composition, which imply STRUCTURAL CHANGE Why structural changes? To modernize the economy To industrialize the economy To pace capital accumulation in the economy 16

17. Major sources of structural changes Increase in population (natural or immigrant ) Application of technical and mechanized processes of production, resulting rise in quantity of output per unit of input Technical progress, generating a continuous growth of real per capita incomes Growth of demand for goods and services 17

18. 18 Structural transformation of the economy Pakistan is basically an agricultural country is no longer true . The services sector has replaced agriculture as the dominant sector of the economy, contributing almost half of GDP. Process and extent of urbanization Emergence and consolidation of middle class Dramatic change in nature of exports from Pakistan Feudalism in Pakistan is relatively reduced

19. From Agriculture to Services Sector Most countries follow a general pattern of economic development. In the first stage of the industrialization process, there is a decline in the percentage share of the agricultural sector, in terms of both output and employment, and an expansion of the manufacturing sector. In the subsequent stage, the services sector becomes prominent while the manufacturing sector declines in relative importance. This is also known in economic literature on stages of development. 19

20. Structural transformation …. Since independence, the mining and agriculture sector (primary sector) are crucial in contributing to national account. Important commodities, such as cotton, sugar, textiles and fisheries etc. With the passage of time, agriculture diversification was in place, where agro-based industries began to gain significance in P akistan economy. Latter at 1990s, liberalization measures were introduced across the board to improve competitiveness and productivity. Manufacturing base shift from developed to developing: cost, market, value added, resource, environment concern 20

21. Early 1980s, growth accompanied by budget deficit and large public debts. To restore the fiscal prudence, structural adjustments were undertaken – shifted primary commodity to modern industrial economy especially manufacturing to expand export base. From 1990s onwards, manufacturing sector has became the relative important sector in contributing to national account. For instance; agriculture contribution to GDP as follows 1951 (53.2%); 1997 (24%); 2021 (18.5%) 21 Structural transformation continued…

22. Shift of Agriculture to Manufacturing sector Population (1951 (33.78millions); 1997 (140millions); 2021 (220millions) Value added Diversity 22

23. Shift of Manufacturing sector to service sector For now, services sector has been identified as one of the key drivers of economic growth. The development of services sector is part of the national development strategy to venture into new growth areas and broaden the economic base. Recent growth policies emphasize on higher value-added services activities. For example, IT services, tourism services, etc. 23

24. Sectoral Contribution on GDP in Pakistan from 1947-2021 24

25. Economic Policy Framework of Pakistan Pakistani government had implemented a series of planning horizons, which are ranging from short-term to long-term development plans. Long-term planning is as follows: Vision 2030 Medium-term planning is as follows: 5-year development plans, e.g. Economic Planning of Pakistan Short-term planning is as follows: Annual Budget 25

26. Recommended Books Zaidi , S. Akbar, “ Issues in Pakistan Economy”, Oxford University Press; 3 rd edition Ishrat Husain, “Pakistan: The economy of an elitist state”, Oxford University Press. Saeed, K. Amjad ,(2007)“Economy of Pakistan, Institute of Business Management, Lahore . Economics Survey of Pakistan (Latest Issues), Economic Advisor’s Wing, Ministry of Finance, Government of Pakistan 26