Economic Profile Pakistan 1947-2013

Pakistan got its independence from the British occupation on 14th August 1947. Since emergence
of the state on the political background of the world, economically, it has experienced a bumpy
ride all together. Many reasons for this are given by the experts and arguments are presented as to
how the situation can be remedied but situation has gradually worsened over the years.

Economic and social outcomes in Pakistan over the last sixty years are a mixture of paradoxes.
Pakistani economy grew at a fairly impressive rate of 6 percent per year through the first four
decades of the nation's existence. A feat achieved by a very few nations. In spite of rapid population
growth during this period, per capita incomes doubled, inflation remained low and poverty
declined from 46% down to 18% by late 1980s, according to eminent Pakistani economist Dr.
Ishrat Husain. This healthy economic performance was maintained through several wars and
successive civilian and military governments in 1950s, 60s, 70s and 80s until the decade of 1990s,
now appropriately remembered as the lost decade.

Politically, however, the interplay of religious fundamentalism, sectarianism, ethnic cleavages and
regional economic disparities has made the country volatile and unstable. Various East Asian
countries that were behind Pakistan in the 1960s have surged far ahead in most economic and
social indicators. Pakistan has thus been unable to realize its potential. South Korea is a prime
example of this case. In 1960’s both counties were almost at the same economic stage but owing
to the inability to implement the economic plans appropriately, the gap between the two states
widened with the passage of time in South Korea’s favor.

Despite sharing a common historical, cultural and social setting, Pakistan and India have pursued
different paths since independence in 1947. Both countries have done reasonably well in
improving their economies and reducing absolute poverty levels. India has, however, emerged as
a stable and vibrant democracy while Pakistan has spent half of its post-independence years under
military dictatorships and is currently struggling to quell an Islamic insurgency in the northwest
part of the country. The democracy–development nexus appears to be well entrenched in the case
of India, while it is faltering in Pakistan. A great deal of recent literature has suggested that China
and India are the typical representatives of authoritarian and democratic regimes, but fewer
attempts have been made to resolve this puzzle in the case of India and Pakistan, two countries
that are more akin to each other and share a common legacy.

In order to address these questions it is useful to revisit the essential dimensions of Pakistan’s
economic and political history, a history which can be divided into six distinct periods:
  The Flat Fifties, 1947 to 1958

 The Golden Sixties, 1958 to 1969

 The Socialist Seventies, 1971 to 1977

 The Revivalist Eighties, 1977 to 1988

 The Muddling Nineties, 1988 to 1999

 The Reforming Hundreds, 1999 to 2007

Period I: The Flat Fifties, 1947 to 1958

Pakistan came into existence as a moth-ridden country at the time of the partition of India.
The British-controlled provinces of Punjab and Bengal were each divided into two parts. East
Punjab and West Bengal formed part of modern-day India; West Punjab and East Bengal, along
with three other provinces, together formed Pakistan. The physical separation between eastern and
western Pakistan, with Indian territory in between, put Pakistan at a serious disadvantage from its
inception.

This era marked the government of Liaquat Ali Khan and initiation of First Fiver Yearly Plan. It
was initiated by Ministry of Finance (MoF), studied and developed by the Economic Coordination
Committee (ECC) and framed after the Russian example. The plan was based on the theory of
Cost of Production value, and also covered the areas of Trickle-Down economic system. State
Bank of Pakistan was established to kick start the economic engine of the nation and major
economic infrastructural expansions took place in the process. Currency war between Pakistan and
India was also a highlight of this era which started with the devaluation of pound sterling and
refusal of exchange in PKR by Indian authorities in 1949. In the mid-1950, these relations were
restored and trade resumed between the two nations.

This era also marked the start of the Korean War which led to economic bloom the local economy
but the growth was retarded by the assassination of Liaqat Ali Khan in October 1951. In 1953 the
plan collapsed altogether due to want of funds. The plan was initiated unsystematically, inadequate
staff and lack of ambition is listed among few of the many causes. Also the shortage of consumer
goods like food, clothes, medicines and sharp fall in production due the monsoon floods of 1951-
52 and 1952-53 were a decisive force to hinder the progress of the nation. Thus, in the end, Prime
Minister Khawaja Nazimuddin was forced to end the program after sending his request to provide
economic assistance from the United States and other friendly counties.

In 1955, Prime Minister Muhammad Ali Bogra again revived the plan and published in 1956. After
reassessing, the program was again launched with focusing (as highest priority) on agricultural
development, and the strong emphasis placed on rapidly increasing the developmental effort in
East-Pakistan and in the less-developed areas of West Pakistan. Prime minister Husain
Suhrawardy of Awami League gave much priority to food development, agriculture and social
development in both states. The concept of Collective farming was introduced by Suhrawardy as
part of his agricultural policies and around 27.0Mn rupees were spent in order to organize the
agricultural in the country. However, this program was built entirely in the absence of much
essential information and basic statistics.

In practice, this plan was not implemented because of its massive size that lacked the physical and
personnel assistance. The shortage of technical knowledge also devastated the program. The
Awami League's government also had shortage of foreign exchange to execute the plan, and was
unable to find outside assistance to fulfill its commitment to the first five-year plans.

The seeds of separation were further sown when the Muslim League lost the 1954 provincial
elections in East Bengal due to a growing disaffection with the ruling political elite in West
Pakistan. This elite from the Punjab province, instead of coming to holds with the criticisms of
East Bengal, adopted a aggressive strategy to consolidate their power by merging all four western
Pakistan provinces into one province. As a result, East Pakistanis were provoked when their
province, which contained the majority population, was forced to accept equality with newly-
formed West Pakistan in the Parliament. The three smaller consolidated provinces—North-West
Frontier Province (NWFP)-KPK, Sindh and Baluchistan—also protested Punjab’s attempt to
establish control.

The political atmosphere was too vitiated; political instability was too acute; tensions between the
different tiers of the government were so damaging; the challenge of setting up the organs of a
new state was so difficult; and the arrival of millions of refugees from India was too demanding.
As a result, economic management took a back seat in this formative phase of Pakistan’s life.