An Economic analysis of the impact of privatization of banks on

the economic growth of Pakistan

1990 to 2005

By
Umar Hayat
M.Phil
Session 2004-05

DEPARTMENT OF ECONOMICS
UNIVERSITY OF PESHAWAR
2007

DEPARTMENT OF ECONOMICS
UNIVERSITY OF PESHAWAR
We hereby recommend that the dissertation entitled An economic analysis of
the impact of privatization of Banks on the economic growth of Pakistan be
accepted as fulfilling this part of the requirement for the degree of Master of
Philosophy in Economics
By
Umar Hayat

Approved By:
Supervisor:

_________________________________
Prof .Dr, Ijaz Majid
Department of Economics
University of Peshawar

Chairman:

_________________________________
Prof.Dr.Muhammad Naeem
Department of Economics
University of Peshawar

External Examiner:

_________________________________

Internal Examiner:

__________________________

CONTENTS
ACKNOWLEDGMENT....................................................................................................i
ABSTRACT...........................................................................................................ii
LIST OF TABLES ...............................................................................................iii
CHAPTER 1
INTRODUCTION..............................................................................................1-4
..........................................................................................................1
1.1

Introduction.................................................................................................1
............................................................................................................
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..........................................................................................................1
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............................................................................................................

1.2

Problem Statement.......................................................................................2
............................................................................................................
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..........................................................................................................5

1.3

Objective of the Study.................................................................................2

1.4

Hypotheses...................................................................................................3

1.5

Research Methodology................................................................................3

1.6

Data Collection............................................................................................4

1.7

Organization of the Research.......................................................................4

CHAPTER 2
REVIEW OF LITERATURE..........................................................................5-23
2.1

Introduction..................................................................................................5

2.2

Review of the Relevant Literature............................................................. 5

2.3

Summary of the Review.............................................................................23

CHAPTER 3
REVIEW OF PRIVATIZATION POLICIES IN PAKISTAN..................24-37
3.1

Introduction...............................................................................................24

3.2

Background of Nationalization and Privatization......................................24

........................................................................................................23

3.3

Privatization trends and development in Pakistan.....................................27

3.4

Privatization policy under the Pakistan peoples party Govt (1988-90).....27

3.5

Privatization policy under the regime of Islamic Jamhori Ittehad Govt....28

3.5.1

Objectives of privatization program of Islamic Jamhori Ittehad Govt 28

3.5.2 Privatization in the financial sector...29

3.5.3

Private Banks29

3.5.4

Privatization of industrial Units30

3.5.5

Offer for sale of public units during 29-30 July 1991..30

3.5.6

The achievements of Islamic Jamhori Ittehad (IJI) Govt.31

3.5.7

Privatization trends towards public utilities32

3.6

Privatization policy of PPP Govt (1993-96)32

3.7

Privatization policy of Military Govt (1999-2005)..34

3.8

Discussion on different policies...36

CHAPTER 4
Specification of Models .................................................................................38-49
........................................................................................................26
4.1

Introduction..38

4.2

Estimation specification38

4.2.1

Measurement of Changes in Bank Efficiency...38

4.3

Sample Data and Variables. 42

4.4

Model Specification and Estimation......48

CHAPTER 5
Estimation of Models......................................................................................50-64
5.1

Introduction..............................................................................................50

5.2

Background of Banking Sector and Privatization in Pakistan..................50

5.3

Estimation of Equations............................................................................51
............................................................................................................
............................................................................................................
........................................................................................................50

5.4

Estimation of Relative Efficiency.57

5.5

Effect of Structural Factors and Market conditions..59

5.6

Deficit Budget and Privatization 62

5.7

Privatization and of efficiency..62

5.8

Efficiency and Manufacturing.......62

5.9

Privatization and employment...63

CHAPTER 6
CONCLUSIONS AND RECOMMENDATIONS.................................65-68
6.1

Introduction........................................................................65

6.2 Conclusions of the study...............................................................................65

6.3

Recommendations... ... ...67

REFERNCES..69-73