Just to build on this, it is true that generally economic growth rates have been higher under military, rather than civilian, rule in Pakistan. Nevertheless, civilian rulers have often been encumbered by a doleful economic inheritance from years of military rule and the high growth rates during army rule have not been secured on robust and sustainable foundations.
This is not too suggest civilian rulers have not themselves mismanaged the economy. In the first decade the government, deeply cognisant of Pakistan’s meagre industrial inheritance at partition, understandably focussed on industrial development. However, they neglected agriculture, despite the fact that the majority of Pakistani livelihoods depended on agricultural income. While the growth rate for industry in the first decade was rapid, agricultural growth was sluggish, at less than 1.5% per annum and below the rate of growth of the population. In the next phase of civilian rule, during the 1970s, the Bhutto regime was beset by ill-luck. There were massive floods in 1973 and 1976-77. In 1973, there was a four fold increase in petroleum prices leading to rising import costs. Following the OPEC price rise, there was also a world recession depressing demand for Pakistani exports. And in 1974-75, there was a failure of cotton crops following pest attacks. At the same time some economists have criticised the Bhutto regime for a lack of an export policy and anti-industrialist outlook, which did much to unsettle private investors, leading to a significant reduction in overall private investment. The third phase of civilian rule, sandwiched between the Zia and Musharraf eras, was in many ways the lost years of economic development. With only slender growth in per capita income, and poor social development, Pakistan faced a mounting debt problem. After the Musharraf years, the PPP began a new period of civilian rule. Notwithstanding a troubling inheritance, in the first three years of the PPP government, there were four finance ministers, three governors of the state bank and four finance secretaries, but no substantial reforms in economy. Poor governance was intensified by some bad luck. Oil prices rose to $145.29 a barrel in July 2008 - the highest ever. The security situation continued to deteriorate. In 2008, the global economic crisis and international recession set in. In 2010, Pakistan experienced terrible floods affecting over 20 million people.
If this is all well taken, military rule in itself has not led to the creation of stable economic foundations. If the Ayub era has been branded as the decade of development for the impressive economic growth rates achieved, it must also be acknowledged that it was a decade of intensifying disparities between provinces and even within the Punjab itself and of a concentration of economic power in relatively few hands. Ultimately, Ayub’s grip on power was loosened by popular protests which undermined his legitimacy to rule. The so-called Green Revolution certainly fuelled substantial agricultural growth in sharp counter-point to the opening decade of Pakistan’s existence. But agricultural growth was highly uneven, dependent as it often was on the installation of tube wells, and benefited the relatively more well off in particular regions. The industrial strategy was also ultimately dependent on foreign aid inflows, to provide foreign exchange for purchase of imports and provide funds for infrastructural, water and power developments - for example the construction of the Tarbela and Mangla dams. Gustav Papanek, involved in public policy in Pakistan, admitted, ‘foreign aid contributed significantly to Pakistan’s growth from the late 1950s: without it, the rapid increase in development in the 1960s could not have been possible’.
The Zia era was also marked by impressive growth rates. Good luck played some part as Zia was a beneficiary from Pakistan being propelled to a front line status, following the Afghan war, as well as being fortunate to inherit the upside of certain economic policies of the predecessor regime which came to fruition in the 1980s. Public sector projects started under Bhutto had long gestation periods and came on stream during the Zia years. The 1980 were also the golden era for foreign remittance inflows. Like the public investment projects, ironically the foundations were laid in the 1970s. The oil boom of the 1970s led to substantial construction contracts in the Gulf states. Bhutto encouraged ‘manpower exports’ and actively sought closer ties with the Islamic world, which resulted in greater opportunities for employment abroad for Pakistanis. These inflows were augmented by a foreign aid which averaged $1.45 billion a year between 1978 and 1983. But the legacy of debt in this decade was inherited by civilian rulers who in grappling with the size of it, turned to IMF repeatedly from 1988 onwards, diluting Pakistan’s sovereignty.
Following the testing of nuclear weapons in 1998, Pakistan had fallen out of international favour and the state of its economy was troubled. But 9/11 ultimately led to the removal of sanctions. There was also an extraordinary degree of rescheduling of debt. $12.5 billion was rescheduled in December 2001. The previous highest amount rescheduled was in 1998-99 - under $2 billion. Remittances also spiked due to the US scrutinising accounts of Muslims. In 2001/2, $778m was sent to Pakistan from the US compared with $79m in 1999/2000. In 2002/3 the figure was $1.7 billion. Many economists feel these particular fortuitous circumstances played a large part in the economic turnaround of Pakistan. In addition, the legacy of the Musharraf years was not a bright one for the incoming democratic government. Even before the PPP took power, economic growth was beginning to slow down. During the caretaker government in 2007/8 the growth rate was now under 4%. Prices of oil and food crops began to rise but for political reasons such increases were not passed on in full. This meant the problem was left to the next government. Government borrowing from the state bank also reached an all time high which contributed to inflation. Economist Ali Cheema has also argued that in the Musharraf era, fiscal deficits were essentially pro-cyclical and therefore resulted in the economy overheating. He compares Pakistan to India, where he notes that for the first time, India managed to cut fiscal deficits during the period of high growth. He also argues that export performance was stagnant and deteriorated after 2006 leaving Pakistan’s current account deficit to be over 4% of GDP by 2006, which he argues was unsustainable. For Cheema, the PPP were therefore confronted by problems that were essentially the result of the Musharraf years.
