Overview of Pakistan Economy • When democracy was restored in November 1988, Pakistan faced 3 major issues. It needed to: • reduce the high fiscal deficits that had led to massive growth in debt--result of the expansionary policies of the 1970s and 1980s • improve the quality and access to social services and address issues of gender imbalance to accelerate the impact of growth on poverty reduction. • rebuild democratic institutions repressed through decades of military governments
There was a common understanding that to cope with these issues Pakistan needed to: • Raise more taxes to reduce the fiscal deficit and generate resources for priority development spending; • Liberalize markets, privatize, and more strongly integrate its economy with the rest of the world; and • Protect expenditures for human development during adjustment and establish mechanisms to improve service delivery.
For more than ten years, all governments vowed to implement this agenda of reforms. Between 1988 and 1999 Pakistan had nine IMF programs and the Bank’s (IBRD and IDA) lending totaled close to US$7 billion, of which, US$1.5 billion were in the form of five adjustment operations. • Throughout this period, many reforms were initiated. To protect social sector expenditures and improve their delivery a nation-wide Social Action Program was launched with strong support from the donor community. In the area of economic reforms, initial progress was achieved in privatization, banking sector reform, trade liberalization, and the deregulation of the investment regime. Some fiscal adjustment also took place.
Overwhelmed by governance problems, however, both the scope and impact of the reforms fell well short of expectations. At the core of the governance problem was the political leadership’s inclination to politicize all aspects of institutional and economic life. Political instability ensued, and between 1988 and 1999 Pakistan had seven governments. May 98 Nuclear test and ensuing sanctions plunged the country in a serious economic crisis which was further exacerbated by Nawaz autocratic regime and his attempts to weaken the judiciary and other state institutions as well rising tensions with India.
The Military Take Over • Put here sentence from spring brief. • When the military took power through a bloodless coup in October 1999, they put governance improvement at the heart of their reform agenda. • Although the coup was very popular, the military were anxious to portray themselves as savior of the nation and pushed through a program of reforms which would resonate well with Pakistan’s poor and under-privileged. • They started their drive to improve governance by prosecuting former ”corrupt” politicians and big loan and tax defaulters--which earned them further popular support.
Reform Program • They then moved quickly with the devolution plan which they saw as a crucial and lasting mechanism to make a real and possibly irreversible difference to the lives of Pakistan’s poor who depend on the district administration for access to crucial services (e.g. education, health, security, justice, and important infrastructure including irrigation). Ninety per cent or more of these services are located at the district or sub-district or community level in Pakistan.
The devolution plan main strengths are: (i) its specifies a political process that would weaken central and provincial governments discretion by devolving more powers to nonpartisan local governments elected officials; (ii) emphasizes the need for an importance of grass-roots accountability of local government; (iii) puts in place checks and balances and external accountability mechanisms including citizen monitoring committees, the District Ombudsman, clear procedures for selection and removal of senior officials and elected representatives.
Devolution • (iv) incorporates provisions to promote popular participation at the local level; (v) reserves 30% of elected positions at the union and tehsil level for women thus attempting to break with traditional non-representation of women in the political process; (vi) provides for representation of peasants/workers and minorities to prevent capture by the current power blocks. • But there are weaknesses • not enough consultation with the provinces risk to alienate the latter • no clear fiscal framework for financing the new administration • no clear road map for the new administrative set up and the use of the current cadre of highly competent civil servants (DC, etc.)