ECONOMY OF PAKISTAN

Pakistan A Portrait of the Death of an Economy My topic deals with Pakistan, its relationship with the IMF and World Bank, and its internal problems that are causing unemployment, poverty, economic crisis and hunger. I shall be analyzing the situation using the neo-classical theory, as it is what the economists of the Pakistan government and the IMF are using to alleviate the economic instability of the country. Situated in the sub-continent, Pakistan is a low-income country, with great promise for growth. Unfortunately, it is held back from reaching middle-income status by chronic problems like a rapidly growing population, sizable government deficits, a heavy dependence on foreign aid, recurrent governmental instability and large military expenditures. It is to address these fundamental faults in Pakistan’s economy that the IMF has initiated the Structural Adjustment Programs (SAPs) in the country. This is discussed in further detail later in the paper. Like all developing countries, Pakistan’s population is largely employed in the agricultural sector, which accounts for about 48 percent of the labor force. In today’s world the Industrial and Service sectors are the largest growing areas of a developed county’s

5 per cent of GDP in the early "90s to a paltry 3 per cent, which translates to a cutback of 140 billion in present prices. b) Contrary to popular belief high rates of return on government issued instruments do not necessarily increase savings rates. Despite inflation being well below double digits, interest rates are as high as 15 to 18 per cent on loans! This is too high to keep the present economy afloat, let alone raise it to a maintainable level of growth. Hence there is a need to restructure the social aspect of the public sector through decentralization, so as to bring about greater efficiency. Yet Pakistan only employs 39 percent of its population in Service, and a minute 13 percent in Industry. Pakistan is a classic example of this theory. The following are some suggestions: a) Until now taxation structure has been a dependent on import related taxes and excise duties. It is not the fault of the IMF that countries have taken loans and are now in debt. In Russia, the IMF contributed to Russia"tms collapse in 1998. 5 billion on critical quality-enhancing nonsalary expenditures in the provinces and federal areas. Banking sector The banking reform program has already started to stem the losses from the politically motivated lending and subsequent operating losses. , the largest oil marketing company, while shares of SNGPL, a major gas distribution company, will be offered for sale to investors. But due to a decline in remittances for a number of reasons and Pakistan"tms declining credit, this is no longer an option. The income tax forms for those in office and heir immediate family should be made public for their time in office so as to control corruption. Decreasing the incentives of holding a seat in senate or assembly can do this.