Military regimes in Pakistan generally pursued policies that strengthened the macroeconomic environment and reduced debt levels through high economic growth rates and foreign assistance. In contrast, democratic regimes struggled with political instability, poor governance, and increasing debt burdens. Currently, Pakistan's public debt exceeds 90% of GDP and the government relies on loans from the IMF and other international organizations to repay debt obligations.

2. Regime wise analysis of
debt in Pakistan
Group no. 3

3. Acknowledgement
 Me and my group members have put our best efforts for the
completion of this presentation assigned to us as the
Macroeconomics –II by our respected Prof. Afzal Ch.
 This report focuses on evaluating the economic debt performance
of democratic governments and dictatorships in Pakistan.

4. Prepared by
Mehvish Nida

5.  Brief contents
 Introduction to Pakistan Economy
 Debt
Intro to Pakistan's debt
Causes of debt burden
Current situation of Pakistan's debt
 Regime wise analysis of Pakistan's debt
Military regime
democratic regime
 Where we are now?
 Democracy & military
 Conclusion
 Suggestion
 reference
Policies pursued to strengthen macroeconomic environment

6. Introduction to Pakistan Economy
 The economy of Pakistan is the 27th largest in
the world in terms of purchasing power
parity (PPP) ,and and 44th largest in terms of
nominal GDP.
GDP by sector agriculture: 21.2%,
industry: 25.4%,
services: 53.4% (2010est.)
Population below poverty line is14% (2013)
The economic growth rate has averaged 5%annually since
1947—2011.
Wikipedia

7. What is Debt ?
 An amount of money borrowed by one party from another.
A debt arrangement gives the borrowing party permission
to borrow money under the condition that it is to be paid
back.
 Bonds, loans are all examples of debt. Many
corporations/individuals use debt as a method for making
large purchases that they could not afford under normal
circumstances.
Investopedia

8. Introduction to Pakistan debt
• Public debt was 54.4% of GDP in 1980s,
• Which increased to unsustainable level in 2012.
• Servicing and debt 2012 it reached to almost 65% of its GDP.
world donor bodies to Pakistan like
International Monetary Fund (IMF)
World Bank (WB)
Asian Development Bank (ADB)
Islamic Development Bank (IDB)

9. causes of Pakistan’s debt
 During the 1960s, Pakistan was seen as a model of economic
development around the world.
 Two wars with India in 1965 and the 1971 and the resultant
separation of Bangladesh from Pakistan also adversely
affected economic growth.
 Later, economic mismanagement in general, and unadvisable
fiscally economic policies in particular, caused a large
increase in the country's public debt.
Wikipedia

10. Cause of debt burden
• Heavy external debt
• stagnant Fiscal deficit
• Pakistan had alower-than-averagetax take
(Only 0.57%)
• Oil prices
• Lessexports& moreimports
• food aid
• Slow economic growth
• Low investment

11. current situation of Pakistan debt
 Pakistan’s total external debt and liabilities amounted to
$5.90 trillion or Rs15.2 trillion.
 Pakistan’s government has paid $393 million as part
repayment of its loan facility with the International
Monetary Fund.
 Balance of payments falls 58%..

12. Regime wise analysis of Pakistan
1958-2013 Structure of the Pakistan government
can has been broken down into two ways.
Democratic regime:
After the earlier the major political regimes was
Zulfikar Ali Bhutto 1971-1973
Benazir Rule 1988-1990
Nawaz Sharif Rule 1990-1993
Benazir Rule Rule 1993-1996
Nawaz Sharif fifth Rule 1997-1999

13. Military regime:
1958-1969 Muhammad Ayub Khan’s Era
1977-1988 Zia- Ul-Haq’s Era
2001-2008 Pervez Musharraf
 In this report we will be evaluating the economic debt performance of
governments of Pakistan from the year 1977 to 2013.
 military government of Ayub, foreign aid commitment was 5.8 percent of GDP

14. Military Dictatorship: 1977-1988
Zia- Ul-Haq’s Era:
it is also called the era of Islamization
 The average fiscal deficit was 7.7 as % of GDP.
 Average GDP growth rate was 6.5% and 7% annually.
 Foreign saving and investment was 21% on average.
 By 1981, the US and Pakistan were discussing a $3.2-billion
aid package.

15. Military Dictatorship: 1977-1988
External debt $9425
Debt growth rate 20.1%
 external debt to GDP ratio was 39.8 percent
or $22billion in 1980.
public debt 127 billion
debt servicing 4.0%
public debt growth rate to GDP ratio was
8.6%.
 Debt from non-bank sources was in excess
of Rs.150 billion or well over 4% of GNP.

16. Military Dictatorship: 1977-1988
 High levels of
aid from the United States,
military grants from China and
subsidies from Saudi Arabia.
 Foreign savings was 21% of financing investment
in the 1980s.
 Zia ul-Haq received a $5 billion from U.S was
channeled through Pakistan for
Afghanistan’s mujahedeen

17.  $4.02-billion military and economic aid package in
1987.
 inflation remained low and poverty declined from
46% down to 18%.
 Pakistan became the second largest recipient of
American aid, after Israel.

18.  Domestic debt was Rs.58 billion in mid-1981.
 Rs.290 billion in 1988.
 Rs.900 billion in 1996
 Public debt as 54.4% of its GDP.
Positive aspects:
 He institutionalized zakat
 introduced interest-free banking
 manufacturing grew by 9.5% per annum
 Investment in the private sector was improved

19. Military Dictatorship: 1977-1988
observations
 Unfortunately in Zia’s rule Pakistan was hit by three
earth quakes respectively.
 which shows that natural disasters played a critical role
in damaging the overall economic performance and cause
of debt burden of Zia rule.
 Pakistan had to approach the International
Monetary Fund (IMF) for assistance in 1988.
 The second military dictatorship in Pakistan ended in
1988 when General Zia-Ul-Haq died in a plane crash.

20. Democratic Regime: (1988-1990) & (1993-1996)
Benazir Bhutto’s Rule
After the death of Zia-Ul-Haq the first open elections were held in November 1988
and the Pakistan Peoples Party won the elections with heavy mandate.
 External debt and liabilities $22 billion in 1990.
 after the end of the cold war, during democratic
regimes in Pakistan, the US economic aid fell from
well above $500 million a year to less than $100
million a year.

21. Democratic Regime: (1988-1990) & (1993-1996)
U.S aid to Benazir's regime in US
$ (million)
Year Economic Aid, Military Aid Per Capita Aid
1988 716.4 401.5 10.63
1989 521.3 341.9 7.06
1990 510.3 263.9 6.93
1993 69.1 o 0.57
1994 63.7 0 0.52
1995 21.5 0 0.17
1996 20.4 0 0.16

22. Nawaz Sharif’s Era
 Fiscal deficit was 8% in 1990-91.
 Loan was $900 million by the IMF.
 External debt $43 billion (47.6% of GDP) in 1998.
 poverty nearly doubled from 18% to 34%.
 1990, almost 43 percent of total revenues were consumed to
repayment of debt.
Democratic Regime: (1990-1993) &(1996-1999)

23. Democratic Regime: (1990-1993) &(1996-1999)
Nawaz Sharif’s Era
 In 1999 total public debt as 99.3% of its GDP
and 629% of its revenue receipts
it was the highest in South Asia.
compared to Sri Lanka (91.1% ) , India (47.2% ).
 Internal Debt in 1999 was 45.6% of GDP and
289.1% of its revenue receipts,
as compared to Sri Lanka (45.7%) and India (44.0%).
 in October 1999 foreign debts stood at $37.9 billion..

24. Democratic Regime:
Observation:
 unemployment rate rose as well
 Foreign savings and investment was an average of
25% in1990-94.
 The HDI of the United Nation Development
Programme ranked Pakistan in one of its lowest
development categories in 1999.

25. Main factors determined Pakistan’s economic performance in the
1990s.
 First, political instability and frequent changes in
the government.
 widespread misgovernance by the two major
political parties ruling the country during this
period.
 Avoiding and postponing timely and difficult
decision by two parties.
 Unforeseen exogenous shocks, such as the
nuclear testing in May 1998 that shook investors’
confidence.

26. Military Dictatorship: (2001-2008)
Musharraf's economic Era:
 External Debt and Liabilities (EDL) was $37.9 billion at
end-June 2000
 war on terror brought in approximately $10 billion of
military assistance.
 June 2007 foreign loans was $40.5 billion.
 in 2008, the country’s external debt was $45 billion
 annual debt servicing payments were $6327 million in
2001-02
 70% of the government revenue was
consumed by debt servicing in the year 2001.

27. Military Dictatorship: (2001-2008)
 Total public debt was Rs.33986 billion.

28. Military Dictatorship: (2001-2008)
 Positive aspects of Musharraf’s Era:
o One of the four fastest growing economies in the Asian region during
2000-07.
o per capita income rising from under $500 to over $1000
o Its growth averaging 7.0 %.
o Pakistan succeeded in reducing poverty by one-half.
o creating almost 13 million jobs,
o halving the country's debt burden,
o raising foreign exchange reserves
o most importantly, taking Pakistan out of the IMF Program.
Real GDP increased from $60 billion to $170 billion during 2000-07".
o improved macroeconomic performance enabled Pakistan to re-enter the
international capital markets in the mid-2000s
o international trade increased from $20 billion to nearly $60 billion.

29. Democratic Regime: (sep2008-Mar 2013)
Asif Ali Zrdari’s Rule
 Pakistani rupee lost one-third of its value
 country was moving rapidly towards the IMF.
Public debt also increased to $56.315 billion rose
from $52.107 billion
scheduled bank borrowings
$193 billion in June 2010.
$239 million in 2011.,
increase by 23.8 %

30. Democratic Regime: (sep2008-Mar 2013)
Ext ernal Debt And Liabilit ies (EDL) rose 7.5% In
2 years 2009-11
$55.901 billion in 2009-10
$60.116 billion in 2010-11.
Increment $711 million in the last quarter of
2010-11.
International Monetary fund ( IMF)
$8.94 billion in 2010
$8.07 billion in 2011
$399 million in February 2012

31. Democratic Regime: (sep2008-Mar 2013)
 In 2008, SBA ( stand by agreement) agreement worth
$11.3 billion with IMF.
 30% increase in government borrowing for
budgetary support,
 short term debt Rs2.854 trillion
 $16 billion increment debt in 4 years
 Receipts from multilateral $1.21 billion.

32. Democratic Regime: (sep2008-Mar 2013)
.domestic debt.
Rs.6014 billion by June 2011.
total Rs.5.594 trillion.
Rs.328.6 billion was taken from SBP.
Repayment :
 paying off Rs120 billion for old dues.
 $7.8 billion has been paid during July-March 2010-
11.
 repayment of short term liabilities of scheduled
commercial banks amounting to $4.3 million in
2010.
 first installment under IMF’s SBA facility of $399
million in February 2012.

33. Democratic Regime: (sep2008-Mar 2013)
Grants and loans: ( 2008-2012)
$ grants $ loans $total
foreign aid 668 m 1.8 b 2.5 b
Project loans 114 m 450 m 565 m
Tokyo pledge 231m 63 m 294 m
Project aid 816 m 81 m 897 m
Earthquake aid 78 m 19 m 97 m
Flood aid 420.3 m 215.6 m 636 m
$ loan$ loan $$
grantgrant
$$
totaltotal

34. Military & civilian Economy

35. Where we are Now??? (in democracy)
.
gap between income and expenditures Rs 769
billion or 5.1% of gross domestic product.
present Government will receive more loan
”war on terror” and bad governance
ADB $700 Million
IMF $6.6 billion
IDB $1 billion
said a foreign financial adviser in Houston Fazal
Ahmed.

36. Where we are Now??? (in democracy)
 In current fiscal year:
 $330 million from IDB by august 15
 IMF board would approve package of $1 billion in
September .
 Will receive $5 million from ADB &
 $5 million from WB.
 receipts from multilateral and others amounted to
$1.21 billion.

37. Where we are now???
Debt payments in current fiscal year :
Pakistan would be paying around 2.5 percent as
interest on the loan every year of IMF loan.
 debt payments amounting to $2.32 billion
(inclusive of $809 million to IMF) and other
miscellaneous payments of $1.52 billion,
Repayment of IMF’s:
 $2.80 billion in fiscal 2013-14,
 $1.35 billion in 2014-15 and
 $60 million in fiscal 2015-16.

38. Conditions of IMF to present Government
 Pakistan hasto fulfill itscommitment to implement with the
IMF.
 Bringing the central bank’s borrowing to a desired
level,
 Enforce general sales tax (GST) on goods and
services.
 Keep the budget deficit within the agreed limits

39. public debt to (as a % of GDP)
91.7
89.1
100.3
56.5
61.7
68.4
75.1
79.7
83.8
95.9
50
60
70
80
90
100
110
1990 1995 1999 2000 2001 2002 2003 2004 2005 2006(T)

40. Comparison of GDP growth rate:

41. US Aid during Civilian Regime:

42. US Aid during Military Regime

43. Conclusion
 outcomes under these civilian regimes have been
disappointing.
 Military regimes provide longer periods of stability,
producing impressive results.
 average level of inflation during civilian rule has been
almost double that under military rule.
 current account balance has historically been healthier
during military regimes.
 all three sectors of the economy performed better during
military regimes,

44. Why dictatorship always better for economy?????
 In dictatorship The average foreign aid from U.S
always $5OO million on every year.
 In democrats rules The average foreign aid from
U.S always $1OO million on every year.
.
 domestic debt negatively effecting
economic growth more or the external debt.
 Pakistan is utilizing this debt for consumption

45. Suggestios
 Introduce direct taxes
 tax collection potential is about Rs.4-5 trillion.
 we are only collecting on-third of the tax potential
 target of Rs2.475 trillion that requires about 28%.,
last year’s collection of Rs1.936 trillion (21%)
 Pakistan needs reforms, not aid.
 enough resources to be able to fill the investment gap

46. Policies pursued to strengthen macroeconomic environment
 Reducing “Twin Deficits”
 Keeping inflation low
 Building foreign exchange reserves
 Maintaining stability in exchange rate
 Maintaining consistency and continuity in policies.
current account deficits and government budget deficits occurs at the same time.

47. Reference:
 Wikipedia
 Investopedia
 The news
 Dawn news
 Daily Times
 International journal of Pakistan
 State bank of Pakistan
 World bank
 UNO
 www.google.com.pk
 www.fbr.org.pk
 www.defence .pk


48. Thank You
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