Lahore School of Economics

The second was the break-up of the country in 1971 after a tragic and avoidable civil war. Here too, the loss of the East Pakistan market for goods from West Pakistan was overcome, although the loss can never truly be measured in economic terms.

The third was the Soviet invasion of Afghanistan in 1979 and the subsequent civil war, which led to an inflow of 3.2 million Afghan refugees and a peaceful country without arms becoming heavily weaponised (‘Kalashnikov culture’). Most unfortunately, the resulting loss of business confidence prevented a relatively open economy from reaping the economic gains of the rapid globalisation which unfolded over the next three decades — something that India, a much more shielded economy in 1980, was able to do by attracting large volumes of foreign investment.

The fourth, the post-9/11 invasion of Afghanistan by US-led Nato forces, which thrust Pakistan into the position of a front-line state in the war against terror, was to result in very high losses: some 80,000 precious lives were lost and near $130 billion in economic and infrastructure losses incurred between 2002 and 2018 as estimated by the finance ministry.

The cost of the unending war in Afghanistan and its spill-over into Pakistan has far outweighed any compensation we may have received in return.

External factors aside, Pakistan’s ruling elite have always put their own interests ahead of the country with active state collusion. A glaring example of this was the permission given to resident nationals to open foreign exchange accounts with complete freedom to transfer unlimited amounts abroad in 1992; this still exists today with minor changes.

A high growth rate of the population, together with low levels of education and skills of its workforce, has resulted in hardly any growth in total factor productivity, which was the driving force behind the performance of the East Asian Tiger economies. There is also the criminal neglect of the manmade irrigation system we inherited, the largest in the world, which has resulted in rising food insecurity and energy shortfalls. The continuing reliance on foreign loans has resulted in the economy being caught in a debt trap — borrowing more to repay existing debt — which only a policy of zero net borrowings can break.

A real strength of the economy which, sadly, remains exploited and neglected, are women — despite some significant progress since the 1980s with the rise of an active women’s rights movement. Together with its youth bulge, Pakistan’s women could propel the economy to a higher, more sustainable and equitable growth path if given the opportunity to realise their full potential.

There is much to be proud of and much to learn in the journey to becoming an upper-middle income economy by our 100th anniversary.

Dr Rashid Amjad is a professor at the Lahore School of Economics and former vice chancellor of the Pakistan Institute of Development Economics. 

Published in Dawn, August 17th, 2022