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Pakistan’s economy passed from sluggish performance to spectular changes. Neither of the two wings of Pakistan possessed an industrial base at the time of independence. With the migration of Hindus and Sikhs from Bengal and Punjab, Pakistan lost its businessmen, and hosted Muslim refugees from parts of India. The partition of Punjab led to a water dispute with India with graver consequences for a population dependent mainly on agriculture. The nation’s exports are still limited to two primary commodities, namely, raw cotton and rice. While forced to spend large sums on defence, Pakistan earned enough (until 1971) from the export of Bengali-grown jute to pay for imports and the development of an embryonic industry. During the 1950s, agriculture and export earnings from cotton and jute were the mainstay of the economy. Merchants earned more than the manufacturers during the Korean War (1960-65) motivated some progress in agriculture and created an initial industrial base. While the war with India (1965) and adverse weather conditions crippled the third Five-Year Plan (1965-70), provinces began to grumble more loudly over regional disparities, and the poorer sections of the population expressed grievances by street violence, which swept away Ayub Khan’s “decade of development”. The country had embarked, under Ayub Khan’s leadership, along the path of economic growth, marked by major infrastructure projects such as the Tarbela and Mangla dams.

Although the fourth Five-year Plan (1970-75) and the Bhutto regime (1971-77) conceived and projected a socio-economic revolution, the decade of the 1970s was marked by a series of shocks such as the loss of East Bengal, the pouring into Pakistan’s treasury of workers’ remittances, nationalization, the rise of the oil price, and the devaluation of the Pakistani rupee. Aiming at some regional and economic justice, the plan nationalized a good many industries, medium agro-processing units, banking and insurance, soon to degenerate into inefficient bureaucracies.[1] The marked preference for a public sector-dominated economic model based on capital intensive, heavy industry bred distrust between the state and the entrepreneurial class. While industry was subject to extensive nationalization, the government did not pursue land reforms. Bhutto resorted to religious phrases such as Musawat-e Muhammadi (Muhammadan equality) to win mass support. The nationalization drive transferred industrial assets from private Mohajir hands to the state dominated by the Sindhi elite led by the Prime Minister. The emerging Mohajir bourgeoisie interpreted the PPP “socialism” as a deceptive appearance for conservative Sindhi “feudalism”. Despite overall growth mainly on account of the employment opportunities during the oil born in the Middle East, the economy was vulnerable due to the low productivity of the major commodity-producing sectors, the widening domestic resource gap and the instability of the export sector. The announcement of percentage rates of increase over small beginnings reminded one of the old Soviet trick used to convey the impression of success.[2] In spite of the rhetoric, very little had been done to distribute goods and services more equitably throughout society. The country’s balance-of-payments was characterized by an increasing trade gap, rising debts and repayment of external loans.

The economic grievances on the heels of the military adventure in East Bengal reversed by the Zia government. The loss of the eastern wing denied a truncated Pakistan revenues from jute. Not only certain economic units were denationalized, Muslim economists sought alternatives to be taken to safeguard equity an d the economic interest of the least –privileged classes within the framework of the moral principles of Islam.[3] President Zia ruled over a prosperous-looking Pakistan largely due to Bhutto’s industrial legacy, the inflow of workers’ remittances, and the Soviet military presence in Afghanistan. However, the structural problems of Pakistan’s economy continued to persist. The prime ministers who followed Zia had to adhere to the guidelines prescribed by the international donor agency. The post-Zia period witnessed slow growth rates, increase in inflation, and widening disparity in income distribution. Its economy traditionally being a loan-oriented one, the debt burden kept rising, and exports lagged behind imports. When the IMF approved in the late 1990s the renewal of the lending programme, it was meant to pave the way for a short-term stabilization of the balance-of-payments.[4] Unable to meet even the repayment of earlier domestic debt, the country is in economic decline.

The major characteristics are high population growth, fiscal policy failures, foreign trade deficit, poor domestic savings, inadequate local and foreign investment, excessive defence spending, decaying infrastructure, and rampant corruption. Whatever prosperity there had been, it iwas due to foreign assistance, not indigenous initiative. Aid was squandered away, and indigenous capabilities, including an entrepreneur business culture, were not encouraged to grow.[5]

Nature has blessed Pakistan, on the other hand, with many ingredients of a vibrant agricultural economy. With four large storage reservoirs, 16 barrages, 12 interriver links, 43 main canals, and three storage dams, Pakistan possesses the largest irrigation network in the world. Accounting directly for one-fourth of Pakistan’s GDP and half of total employment, the agricultural sector is, without doubt, the mainstay of the country’s economy. Cotton-based products contribute between agricultural performance and the country’s overall economy. On the other hand, the vested interests of the Pakistani landlord class, dominant in politics and bureaucracy, withstand all attempts to introduce land reforms. Even more than half a century after independence, the feudal landlords maintain their iron grip on the nation-state. The Daultanas, Khars, Legharis, Mazaris and the Nawabsadas “see their death” in agrarian reforms.[6] Putting aside two cosmetic changes in 1959 and 1972, one may assert that there has never been a meaningful land reform. In Punjab, 1% of the landowners possess 26% of the total cultivable land.[7] The landed aristocracy blocked the few attempts designed to extend social justice.

Home remittances, the second largest source of foreign exchange earnings about a decade ago, are also declining annually. Oil reserves being modest, the focus shifts to the large coal deposits recently discovered in the Sindh province. Literacy level put at 35% for the overall population, Pakistan’s human development indices are among the weakest in the region. The country’s technological handicap is in evidence in all fields, including agriculture.

In retrospect, it may even be asserted that Pakistan enjoyed an enviable record as a fast developing country until the 1990s. During most of the years after its economy began its “take off” some three decades ago, Pakistan had the second largest economy in South Asia, in absolute terms after India and in per capita measurement after Sri Lanka. Remembering its pitiful resources and capital endowment at independence and in comparison with other countries, Pakistan’s earlier economic achievements may be termed as uncommon. But as the country approached the next millennium, it became apparent that the economy was suffering from deep-rooted infirmities. Pakistan’s economic growth rate in the last decade, compared with 5.4% per annum over the years 1958-68 or 6.5% on the average during 1978-88, was considerably lower or a mere 4%. That country has been living beyond its resources for the last decade or so. Its leadership pursues high defence expenditure while domestic and external debts sharply increase. Despite on overall trend of economic failures, the Pakistan armed forces have made major military acquisitions. Lack of improvement in relations with India necessitates the continuation of high defence expenditure. This situation was the economic setting for the nuclear tests of mid-1998 and the renewal or armed encounters in Kashmir a year later. International sanctions in the post-nuclear weapon test phase adversely affected the economy. Having at times per rate or per capita income, Pakistan is now showing a marked slowdown among the major South Asian economies.

That country may produce 70% of all soccer balls manufactured worldwide or it may be a global supplier of surgical instruments of some quality, but its annual debt-servicing requirements lately amount to 5% of its GDP and 40% of export earnings. While agriculture, which is the very foundation of the economy, is exhibiting signs of plateauing, remittances from the oil-rich Gulf area are nowhere plentiful as they used to be during Bhutto’s and Zia’s time. Both of these vital components seem to be exhausted. Industry is ill-equipped to be the engine of future growth, and there are no other engines in sight. Abstention from costly foreign skirmishes, such as the ones in Kashmir, will help. One can only agree with a number of Pakistani intellectuals that it is necessary to reduce military spending and other non-productive expenditures in order to release additional resources for the country’s economic development on an independent basis.[8]

[1] Syed Nawab Haider Naqwi and Khwaja Sarmad, Pakistan’s Economy Through the Seventies, Islamabad, Pakistan Institute of Development Economics, 1984.

[2] W. Eric Gustafson, “A review of the Pakistani Economy under Bhutto”, ed., Manzooruddin Ahmed, Contemporary Pakistn: Politics, Economy and Society, op. cit.,

[3] Sayeed Nawab Haider Naqwi and Asghar Qadir, A model of a Dynamic Islamic Economy and the Institution of Interest, Islamabad, Pakistan Institute of Development Economics,

[4] The Economist Intelligence Unit, Country Report: Pakistan, Afghanistan, London, 1999,

[5] Bidanda M. Chengappa, “Pakistan’s Economy: Trends and Issues”, Asian Strategic Revfiew: 1998-99, New Delhi, Institute for Defence Studies and Analyses, 1999.

[6] Ishtiaq Ahmed, “Feudalism in Pakistan”, The Nation, Islamabad, 22-23 May 1997.

[7] Sreedhar and Bhagat,

[8] For instance: Kaneez Fatima, “The Other Side of U.S. “Generosity”, World Marxist Review, Prague, 11 (November 1988),

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