The economy is a complex system encompassing the production, distribution, and consumption of goods and services within a society. It is driven by various factors, including labor, capital, resources, and technological advancements. Economic activities are influenced by policies set by governments and institutions, which aim to balance growth, inflation, and employment. Market dynamics, such as supply and demand, also play a crucial role in determining prices and resource allocation. The health of an economy is often measured by indicators like GDP, unemployment rates, and inflation, which provide insights into its performance and stability. Understanding economic principles is essential for making informed decisions in both public and private sectors.

1. Brief History of Economic
Development of Pakistan
Lecture No: 02
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2. First Part
Historical overview of economy of Pakistan
Second Part
Current situation of economy of Pakistan
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3. Outline
 Pre-independence history
 Different economic eras
 Structural changes in Pakistan

4. 4
Colony
 The role of colony to British empire
 How British ensure their power in colony
 Its impact on Pakistan economy
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5. 75 years of development laying the
Foundations:1947-1958
 Major features
 Predominantly agrarian nature
 Undeveloped and newly independent nation
 Little industrial structure, few services and no infrastructure
 Adverse international conditions and precarious domestic
situation
 Lack of capital
 Trade surplus
 Attempts to keep Pakistan on its feet
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6. The decade of economic development:1958-1968
 Economic achievements
 Considerable economic growth and development
 Significant improvements in industrial and agriculture
production
 Capitalist economy model
 High growth rate in manufacturing sector
 Increase in exports and relatively less imports
 Progress in agriculture sector
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7. The decade of economic development:1958-1968...continued
 Policy failures
 Increasing disparities in incomes
 Concentration of economic prosperity
 Negligence of social sectors
 Little or no increase in real wages
 Trade restrictions
 Distortion of local markets
 Overvaluation of exchange rate
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8. The bad Luck Years:1971-1977
 Economic achievements
 Foundations for future economic growth and
development
 Establishment of basic industries
 Base for a capital goods industry
 Middle East economic boom
 Illiberal economic policies
 Foreign exchange earnings from devaluation
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9. The bad Luck Years:1971-1977…Continued
 Economic failures
 Some events beyond control affected economic
program of this era
 Downward trend in economic growth
 Process of Nationalization
 Cotton crops failure
 Natural disasters including floods
 Exports Crisis
 Balance of payments issue
 Devaluation of Pakistani rupee 9

10. ThesecondMilitaryGovernment1977-1988
 Economic achievements
 Liberalization of macroeconomic policies
 Relatively higher industrial growth
 Economic revolution due to foreign remittances
 Foreign aid
 Emergence of middle class, etc etc
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11. ThesecondMilitaryGovernment1977-1988…continued…
 Economic policy failures
 Socio-economic impact of Martial law
 Politico-economic instability in Pakistan
 Confusion of economic policies
 Underutilization of economic resources including
foreign aid and remittances
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12. The Era of Structural Adjustment:1988-1998
 Major economic achievements
 Return of political democracy
 Era of structural adjustment
 Economic liberalization and stabilization
 Process of Privatization
 Decease in tariff rates
 Fiscal deficit reduction to 4% of GDP
 High taxation and reduced public expenditure
 Indirect taxes imposed and instead of decreasing non development or defense
expenditure, development budget decreased
 Continuous rise in prices of utilities (gas, electricity, and petrol)
 Selling off state owned enterprises
 Devaluation of Pak rupee 12

13.  Major Policy Failures
 Macro economic crisis
 High taxation
 Low spending in social sectors
 Trade reforms and deindustrialization
 Continuous devaluation of the Pakistani rupee
 Increased in the administrated prices of utilities
 High inflation & Unemployment
 Privatization without proper policy
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The Era of Structural Adjustment:1988-1998…continued…

14. macroeconomic situation:1998-2004
 Salient features
 Increase in economic growth
 Rise in industrial production
 Increase in exports earnings
 Strong upsurge in domestic investment
 Pre-payment of high cost external debt
 Rise of foreign exchange reserves
 Strategic re-entry into the international capital markets
 Increase in spending on education
 Increase in FDI 14

15. The economy in FY2005-FY2007
 GDP growth at over 8.4% for the first time in 8 years
 Sound macroeconomic fundamentals
 Strengthening of key sector by economic reforms
implemented in the 4-5 years
 Average economic growth around 7%
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16. Structural changes in Pakistan
 Changes in levels of some basic magnitudes are generally associated with
changes in composition, which imply STRUCTURAL CHANGE
o Why structural changes?
 To modernize the economy
 To industrialize the economy
 To pace capital accumulation in the economy 16

17. Major sources of structural changes
 Increase in population (natural or immigrant)
 Application of technical and mechanized processes of
production, resulting rise in quantity of output per unit
of input
 Technical progress, generating a continuous growth of
real per capita incomes
 Growth of demand for goods and services 17

18. 18
Structural transformation of the economy
 Pakistan is basically an agricultural country is no longer true.
 The services sector has replaced agriculture as the dominant sector of the
economy, contributing almost half of GDP.
 Process and extent of urbanization
 Emergence and consolidation of middle class
 Dramatic change in nature of exports from Pakistan
 Feudalism in Pakistan is relatively reduced

19. From Agriculture to Services Sector
 Most countries follow a general pattern of economic development.
 In the first stage of the industrialization process, there is a decline in
the percentage share of the agricultural sector, in terms of both output
and employment, and an expansion of the manufacturing sector.
 In the subsequent stage, the services sector becomes prominent while
the manufacturing sector declines in relative importance.
 This is also known in economic literature on stages of development.
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20. Structural transformation….
 Since independence, the mining and agriculture sector (primary
sector) are crucial in contributing to national account. Important
commodities, such as cotton, sugar, textiles and fisheries etc.
 With the passage of time, agriculture diversification was in place,
where agro-based industries began to gain significance in Pakistan
economy.
 Latter at 1990s, liberalization measures were introduced across the
board to improve competitiveness and productivity.
 Manufacturing base shift from developed to developing: cost, market,
value added, resource, environment concern
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21.  Early 1980s, growth accompanied by budget deficit and large
public debts.
 To restore the fiscal prudence, structural adjustments were
undertaken – shifted primary commodity to modern industrial
economy especially manufacturing to expand export base.
 From 1990s onwards, manufacturing sector has became the
relative important sector in contributing to national account. For
instance; agriculture contribution to GDP as follows
 1951 (53.2%); 1997 (24%); 2021 (18.5%)
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Structural transformation continued…

22. Shift of Agriculture to Manufacturing sector
 Population (1951 (33.78millions); 1997 (140millions); 2021
(220millions)
 Value added
 Diversity
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23. Shift of Manufacturing sector to service sector
 For now, services sector has been identified as one of the key
drivers of economic growth.
 The development of services sector is part of the national
development strategy to venture into new growth areas and
broaden the economic base.
 Recent growth policies emphasize on higher value-added
services activities. For example, IT services, tourism services,
etc.
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24. Sectoral Contribution on GDP in Pakistan from 1947-2021
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25. Economic Policy Framework of Pakistan
 Pakistani government had implemented a series of planning
horizons, which are ranging from short-term to long-term
development plans.
 Long-term planning is as follows:
Vision 2030
 Medium-term planning is as follows:
5-year development plans, e.g. Economic Planning of Pakistan
 Short-term planning is as follows:
Annual Budget
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26. Recommended Books
 Zaidi, S. Akbar, “Issues in Pakistan Economy”, Oxford
University Press; 3rd edition
 Ishrat Husain, “Pakistan: The economy of an elitist state”,
Oxford University Press.
 Saeed, K. Amjad,(2007)“Economy of Pakistan, Institute of
Business Management, Lahore.
 Economics Survey of Pakistan (Latest Issues), Economic
Advisor’s Wing, Ministry of Finance, Government of
Pakistan
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