Pakistan, an impoverished and underdeveloped country, has suffered from decades of internal political disputes, low levels of foreign investment, and declining exports of manufactures. Facedwith untenable budgetary deficits, high inflation, and hemorrhaging foreign exchange reserves,the government agreed to an International Monetary Fund Standby Arrangement in November 2008. Between 2004-07, GDP growth in the 6-8% range was spurred by gains in the industrialand service sectors, despite severe electricity shortfalls. Poverty levels decreased by 10% since2001, and Islamabad steadily raised development spending in recent years. In 2008 the fiscaldeficit - a result of chronically low tax collection and increased spending - exceeded Islamabad'starget of 4% of GDP. Inflation remains the top concern among the public, jumping from 7.7% in2007 to 20.8% in 2008, primarily because of rising world fuel and commodity prices. Inaddition, the Pakistani rupee has depreciated significantly as a result of political and economicinstability.
Economic Development in Pakistan
After the founding of Pakistani State in 1947, the Government’s economic policy concentratedattention on developing an economic infrastructure, achieving self-sufficiency in food, anddeveloping export industries. However, an intrusive and over sized public sector, an over regulated economy, excessive discretionary powers often incompatible with the level of theofficial, and an absolute lack of transparency, provide the optimal environment for opportunitiesof corruption restricting the economic development in the country. Combination of these factorswith weak accountability ensures that economic backwardness get entrenched into the entirefabric of society. Despite the pervasive pessimism that is undoubtedly felt, we have come acrossmany who would willingly embrace new practices if only the scourge of corruption could belifted from their lives. The countries that have surged ahead, on the other hand, are characterized by high level of human capital accumulation where the educated labour force has raised the levelof output and the rate of growth over a sustained period of time.Inefficient public expenditure process, higher cost of basic input, lack of skilled humanresources, corruption and nepotism restrict Pakistan far behind in development according torecently announced World Bank report. Pakistan is suffering from shortage of infrastructure inthe water, irrigation, power, and transport sectors. Infrastructure is essential for sustained growthand competitiveness both in the local and international markets. The gaps between demand andsupply in these sectors are alarming. The plans needs to put in place urgently, these criticalshortages would continue to undermine the efforts to improve socio-economic indicators and toreduce poverty. Without adequate irrigation resources, power and transport infrastructure, thevery sustainability of Pakistan as an independent nation may be at stake as shortages could leadto increased social discontent and disharmony amongst the federation and the provinces.Pakistan is on the list of the most water stressed countries in the world, and forecasts indicatethat available resources are depleting rapidly, possibly leading to a state of water scarcity in thenext two decades. Much of the water infrastructure is in poor repair and Pakistan has to investalmost Rs 60 billion per year in new large dams and related infrastructure over the next five year.In the energy sector, Pakistan will face severe power shortages of approximately 6,000megawatts by the year 2010 (equivalent to about three Tarbela dams) and 30,700 MW by theyear 2020.