Pakistan's Declining Economy Since 2008

[Trisonics]

notice the "World War II--estimated", he has even retained the "--" but quotes a wrong figure

 

[RiazHaq]

Haque Sahab,

Take these figures and try to convince a common Pakistani about the growth and what not. I am afraid you'll need Police protection as well, because I do not think that this statistical juggling will impress an average Pakistani household earning less than $200 and trying to survive where inflation is well into two digits. These figures look nice on the papers, but they have little if any relevance with the facts on the ground. In Pakistan, merely 8.5% people are paying taxes, and they are mostly government or private employee. Rest of the 91.5% people are simply not paying any kind of tax, means that the government/financial institutions have no record of any kind of their earning/spending etc. In a country where the economy is this much documented, you are talking about statistics?

Dont tell me about the percentage of the growth rate, this is meaningless; tell me how an average Pakistani household earning less than US$200 survive in kind of inflation rampant in Pakistan? Where prices are revised not every month, or every week, but daily.

Unfortunately, I can not disagree with you today. This is the bitter harvest of feudal democracy Pakistanis have voted for.

Many Pakistanis who were lifted out of poverty as a result of healthy economic and jib growth are now slipping back into poverty since mid-2008. As Dr. Ashfaque argues, Pakistan has had to return back to the IMF which has imposed tough conditions to control inflation as price for its loans.

By the current government's own admission in its MOU with IMF, it inherited a relatively sound economy, and it's the result of policy inaction when there was no one really in charge of Pakistan's economy in mid-2008. Economies don't run on auto-pilot. They have to be carefully and closely managed to respond to changing conditions.

 

[sparklingway]

The proponents of aid :-

1950-1964: As the Cold War heated up, a 1954 security agreement prompted the United States to provide nearly $2.5 billion in economic aid and $700 million in military aid to Pakistan.

Adjusted for Inflation : Economic Aid : 17.25 Billion USD and Military Aid 5.022 Billion USD.

Per Year economic assistance :- 1.15 Billion USD. Small numbers eh![

1952-1967:- 3.5 Billion USD in development assistance

Adjusted for Inflation : 25.62 Billion USD

Per Year development assistance :- 1.70 Billion USD.

Source: Foreign Aid and Industrial Development in Pakistan By Irving Brecher, S. A. Abbas

1991-2000: But even while Pakistan was serving a strategic Cold War purpose, concerns persisted about the country's nuclear ambitions. That gave President George H.W. Bush an easy out from the massive funding commitments in 1990, after the fall of the Soviet Union. Aid over the next decade withered to $429 million in economic assistance and $5.2 million in military assistance, a drop-off Pakistanis still cite bitterly, accusing the United States of leaving them high and dry during the decade.

Adjusted for Inflation:- Economic : 592.47 Million USD and Military 7.18 Million USD

Per Year economic assistance :- 59.24 Million USD

Ratio b/w annual aid in two eras :- 19.40 times

(Courtesy Time Magazine and US Bureau of Labor and Statistics)

"Our dependence on the US historically also resulted in the skewing of our national priorities in favour of the military at the expense of the economic development of the country and the welfare of the people. In fact, one can even argue that the coincidence of the increased availability of the US aid during the reign of military regimes in Pakistan in 1960’s, 1980’s and in the post-9/11 period may have strengthened the military’s domination of the country’s politics and encouraged deep inroads into its economy in the form of the military’s vast industrial, commercial, banking and real estate empire. The availability of additional resources also multiplied the opportunities for corruption on the part of the ruling establishment of the country including the civilian bureaucracy, the military and the politicians. " - Former Ambassador Javed Husain in The Nation


Source :- Impact of Foreign Aid on Economic Development in Pakistan [1960-2002], Mohey-ud-din, Ghulam

(Keep in mind the figures are in 2002 value of USD and figures haven't been adjusted for inflation. For rough estimates 1 USD in 1962 = 7.18 USD in 2010)

Ajusted for Inflation :-
Per capita aid in 2002:- 16.86 USD
Per capita aid in 1964:- 58.84 USD
Per capita aid in 1997:- 9.45 USD

Does anybody see a high per capita aid in military regimes? I certainly do. Zia and Absconder Commando's times saw the US needing Pakistan's help and the US pushed huge amounts of money into Pakistan. Akhtar Abdur Rehman and Fazl e Haq made quite a big family bank out of the aid.

The '60s was like an economy running on steroids provided by the US. The '90s saw a mismanaged economy thanks to an insecure democratic system, infighting and trade sanctions. Haq Sb, having a soft corner for generals shouldn't allow for twisting facts.

Nonetheless, Foreign Aid is not the way. India managed its economy under red shadows and did not get addicted on International Financing Institutions. We got on the Us bandwagon in '47, jumped into the seat with SEATO/CENTO and have never been able to stand on our own. The dependency syndrome has got us by our feet.

 

[RiazHaq]

Nonetheless, Foreign Aid is not the way. India managed its economy under red shadows and did not get addicted on International Financing Institutions. We got on the Us bandwagon in '47, jumped into the seat with SEATO/CENTO and have never been able to stand on our own. The dependency syndrome has got us by our feet.

Let me first say that most developing nations (such as India and Pakistan) and developed nations (e.g. post WW2 Europe and Japan under in Marshall Plan) have received significant foreign aid. So the aid itself is not a problem; it's how it's used that needs to be scrutinized.

Foreign ad can only be helpful only if the country's economy is in competent hands, and the aid is utilized effectively to invest in projects that grow the economy and create opportunities for the people to grow with it.

In Pakistan's case, the aid alone can not account for nearly tripling of the economy during Musharraf's rule, as acknowledged by the current regime in a memo it signed with the IMF to get the bailout.

Here's what it said:

The country's real GDP increased from $60 billion to $170 billion, with per capita income rising from under $500 to over $1000 during 2000-07". It further acknowledged that "the volume of international trade increased from $20 billion to nearly $60 billion. The improved macroeconomic performance enabled Pakistan to re-enter the international capital markets in the mid-2000s. Large capital inflows financed the current account deficit and contributed to an increase in gross official reserves to $14.3 billion at end-June 2007. Buoyant output growth, low inflation, and the government's social policies contributed to a reduction in poverty and improvement in many social indicators". (see MEFP, November 20, 2008, Para 1)


You may or may not like Musharaf, but let's not be disingenuous and deny Pakistan's economic achievements on his watch.

Haq's Musings: Musharraf's Economic Legacy

 

[jagjitnatt]

Mr. Haq, you are twisting numbers and figures by a huge margin. Not just for India but also for Pakistan. I request all members to cross check his figures by some reliable source.

Your last post itself was exaggerated.
GDP of Pak in 2000 - 74 billion (you said 60, dif 23&#37
in 2007 - 143 billion (you said 170, diff 19%)
today - 168 billion
Real and Nominal GDP of Pakistan
Google - public data

 

[tadka]

@ title , Has us aid to Pakistan Declined ?

 

[RiazHaq]

Mr. Haq, you are twisting numbers and figures by a huge margin. Not just for India but also for Pakistan. I request all members to cross check his figures by some reliable source.

Your last post itself was exaggerated.
GDP of Pak in 2000 - 74 billion (you said 60, dif 23%)
in 2007 - 143 billion (you said 170, diff 19%)
today - 168 billion
Real and Nominal GDP of Pakistan
Google - public data

The figures I have quoted are official, and used as part of a memorandum of understanding agreed between the IMF and Govt of Pakistan in 2008 as part of the bailout package.

 

[RiazHaq]

@ title , Has us aid to Pakistan Declined ?

The total foreign aid to Pakistan as percentage of its economy has been declining for several decades. It has gone down from about 10% of the economy in the 1960s when Pakistan was a member of SEATO and CENTO to less about 3% in 2002-2008 when its economic growth was higher than in the 1960s.

http://mpra.ub.uni-muenchen.de/1211/1/MPRA_paper_1211.pdf

 

[sparklingway]

The figures I have quoted are official, and used as part of a memorandum of understanding agreed between the IMF and Govt of Pakistan in 2008 as part of the bailout package.

Give the source for clarification purposes. Either Google got the wrong numbers from WB or the MoF is fudging them.

Let me first say that most developing nations (such as India and Pakistan) and developed nations (e.g. post WW2 Europe and Japan under in Marshall Plan) have received significant foreign aid. So the aid itself is not a problem; it's how it's used that needs to be scrutinized.

Receiving minimal aid is far from from becoming dependent on aid for the PSDP budgets, that is what we did in the '60s and nearly did in the late '70s as well. Aid creates dependency that has political, economic and trade implications and this has been discussed in detail in both development economics and development geography. I'll be more than happy to refer if you want me to.

In Pakistan's case, the aid alone can not account for nearly tripling of the economy during Musharraf's rule, as acknowledged by the current regime in a memo it signed with the IMF to get the bailout.

Credit should be given when due. Better economic conditions globally, removed trade sanctions and increased assistance were definitely major factors in addition to the artificial reduction in inflation due to high subsidies on utilities. Some might argue that the state progressed well even with such high subsidies, but like history, economic discussions and publications are highly polarized many a times; specifically when it comes to predicting the future pay offs of a said economic policy and its implications on the system structure.

I can understand the opinions of those who say that liberalizing the economy was much needed and a good step (though I don't agree entirely), but I cannot understand and will not agree with those half cooked flawed arguments about how the real estate boom was amazing (and its amazing fall out globally and locally), how the telecom boom is a symbol of economic progress or how consumer financing was a revolution, when 3 banks control and dictate policies and maintain the highest interest rates in the region (refer to Shahid Kardar and Meekal Aziz's discussions in The News recently as well).

I have dwelled into slight detail of how profitable state institutions were sold in shady deals (I have not yet discussed the biggest farce of all KESC). Neoliberal policies dictated by IFIs are not going to help us. The state has to maintain regulation over major concerns.

The economy grew due to some major factors which were not products of Shaukat Aziz's policies. The state allowed cartelization beyond imagination and has let a country in tatters, a reminder of which is the current power crisis (on which I have dwelled as well).

I will agree with you on certain major economic indicators though. We established regulatory methods for a large number of new sectors, a process hated by IFIs and neoliberals. The state was influential in finding new trade markets for small traders as well. HDI improved well during 02-06 and GNP increased quite well during these times as well.

 

[Imperial]

The figures I have quoted are official, and used as part of a memorandum of understanding agreed between the IMF and Govt of Pakistan in 2008 as part of the bailout package.

Can you please give a neutral source to support this claim. Since we are negating google public data. I am not sure how are you arriving at these numbers.

Unless its just to prove a point, then well I can also make 2==4.

 

[sparklingway]

Can you please give a neutral source to support this claim. Since we are negating google public data. I am not sure how are you arriving at these numbers.

Unless its just to prove a point, then well I can also make 2==4.

I am sure he's not deliberately fudging figures. The source might have got it wrong

 

[RiazHaq]

Receiving minimal aid is far from from becoming dependent on aid for the PSDP budgets, that is what we did in the '60s and nearly did in the late '70s as well. Aid creates dependency that has political, economic and trade implications and this has been discussed in detail in both development economics and development geography. I'll be more than happy to refer if you want me to.

US post-war aid to Europe was about $25 billion (1946 dollars), a massive amount relative to the US GDP of about $250 billion at the time which accounted for half of global GDP.

So the US aid prior to and during Marshall Plan was very large and given over a short period of time to rebuild Europe and Japan. Both used it well and Japan and Germany soon became the second the third largest economies and formidable economic competitors of the donor.

This shows that if the aid is properly utilized by recipients, it can do wonders, or it can create a culture of dependence, as it has in many developing nations, particularly in Africa where it accounts for almost half their total budgets in some countries.

In Pakistan's case, aid has been declining as percent of its economy for decades...from about 10% of the economy in 1960s to about 3% in the last decade.

But I do agree that Pakistan needs to gradually wean itself of foreign aid completely, and replace it with trade and investment.

 

[Indiarox]

Ok we got aid look how we used it and how Pakistan uses it look at your own problems and money you get and how you use it.
Try not to compete with India till your economy can sustain it trying to economically compete with India in spending will only lead to further economic degradation

 

[sparklingway]

user "saab" deserves a medal for this:

 

[karan.1970]

Riaz sb, with respect, I believe you have it the wrong way round. India has "impressive economic growth" BECAUSE of over $100B of aid/assistance it has received over the years.

@Tech and @Riaz

I think you are absolutely right. We got the aid and used it for what it was supposed to be used and grew economically in an impressive manner. So thanks for all the countries that gave that aid to us. We in our own small way are trying to pay some of that back now by trying to help countries like Afghanistan by ploughing some capital into it at its time of need (despite opposition from Pakistan). Hopefully this giving back will increase in years to come as we grow more and are able to reduce poverty in our own country

Am interested in knowing what happened to the aid given to Pakistan. Why is its economy despite having wonderful decades in the last century, is in a major downspin right now?? Why is it still going after USA(who public opinion in Pakistan hates) or other Friends Of Pakistan asking for absurd amounts??

Please dont try and ignore your screw ups by finding less flattering reasons for your neighbours growth. Wont help you except for may be one night's sleep