Lecture 7 (Pak Eco)
Lecture 7 (Pak Eco)
Lecture 7 (Pak Eco)
Lecture 7
THE MUDDLING NINETIES
• Bhutto 1988-1990
• Bhutto 1993-1996
• GDP growth rate during this period averaged 4.9% per annum compared to 6.6%
per annum during 1977-88.
• The rate of inflation accelerated during 1988-96 and exceeded 12% per annum
during 1993-6.
• Macroeconomic policies failed to halt the growing imbalances in the budget growing financial
vulnerability.
• No serious efforts were made to mobilize domestic resources in the public sector for development.
Shift towards private sector
• Government stepped up the rate of privatization in 1991.
• Active pursuit of foreign private investment for energy development on the bases
of long term agreements was the key element of the new energy policy adopted in
1994.
• The first large energy development project in the private sector, the hub power
project was completed in 1997.
• With the help of the World Bank, plans for the first large oil field power station
with a capacity of 1293 MW at hub in Baluchistan were finalized.
Shift towards private sector
• The sale of the part of the shares of PTCL to the foreign investors was only
a first step towards the privatization of this important entity.
o E.g., monopoly in cement where Mian Mansha got all five plants of DG cement under
privatization scheme in 1992.
• Only 22% of privatized units performed better, however 34% were really
performing worse:
• The fiscal deficits averaged 6% of GDP during the fiscal years 1990-3
and 1994-6 respectively.
• Public sectors external debt nearly doubled rise in ratio of debt to GDP.
• The debt-servicing problem was compounded by a faster growth in interest payments than
in debt stock
• Loan defaults
o loans were issued based on political motivations rather than economic assessment
• Stock Market
• Nawaz Sharif
o Motorway
• 1991: signed contract with Daewoo to build a four lane motorway by 1995
o Yellow Cabs
o Power Sector
• Designed by World Bank – aimed at improving primary education, health care, family
planning, rural water and sanitation.