Movie Review

1988 - 1999

Farhan Nisar Seminar in Economic PolicyThe Lost Decade 1988 1999IntroductionFew FactsPerformanceMonetary PolicyFiscal PolicyTradeConclusion The Lost Decade 1988 1999Profiles

Benazir Bhutto

Nawaz Sharif21st Jun 1953 27th Dec 2007

11th Prime Minister of Pakistan

Prime Minister from:2nd Dec 1988 6th Aug 199019th Oct 1993 5th Nov 1996

25th Dec 1949

12th Prime Minister of Pakistan

Prime Minister from:6th Nov 1990 18th Jul 199317th Feb 1997 12th Oct 19995th Jun 2013 To current

Pakistan Peoples Party

Social Islamic leftistPublic OwnershipSecularism main weaponPakistan Muslim League (N)

Centre right (Islamist capitalist)Economic ideologyFiscal activities (Mega projects) Eg: Motorway etc No PotraitNameTook OfficeLeft OfficeElectionsPolitical Party 11 Benazir Bhutto (1953-2007)2-Dec-886-Aug-9016-Nov-88Pakistan People's Party A Ghulam Mustafa Jatoi (1931-2009)6-Aug-906-Nov-90-National Peoples Party 12 Nawaz Sharif (1949-)6-Nov-9018-Apr-9324-Oct-90Pakistan Muslim League (N) A Balakh Sher Mazari (1928-)18-Apr-9326-May-93-Pakistan People's Party (12) Nawaz Sharif (1949-)26-May-9318-Jul-93-Pakistan Muslim League (N) A Moeenuddin Ahmad Qureshi (1930-)18-Jul-9319-Oct-93-Independent (11) Benazir Bhutto (1953-2007)19-Oct-935-Nov-966-Oct-93Pakistan People's Party A Malik Meraj Khalid (1916-2003)5-Nov-9617-Feb-97-Independent (12) Nawaz Sharif (1949-)17-Feb-9712-Oct-993-Feb-97Pakistan Muslim League (N)

The Lost Decade 1988 1999Name of Finance MinisterEntered OfficeLeft OfficeBenazir BhuttoDecember 4, 1988August 6, 1990Sartaj Aziz(caretaker till 6 Nov 1990)August 6, 1990July 18, 1993Syed Babar Ali(caretaker)July 23, 1993October 19, 1993Benazir BhuttoJanuary 26, 1994October 10, 1996Naveed QamarOctober 10, 1996November 5, 1996Shahid Javed Burki(caretaker)November 11, 1996February 17, 1997Sartaj AzizFebruary 25, 1997August 6, 1998Ishaq DarNovember 6, 1998October 12, 1999Source: http://en.wikipedia.org/wiki/Finance_Minister_of_PakistanThe Lost Decade 1988 1999Structural Adjustment Program Structural adjustment programs are economic policies which countries must follow in order to qualify for new World Bank and International Monetary Fund (IMF) loans and help them make debt repayments on the older debts owed to commercial banks, governments and the World Bank

What is SAP?

The Lost Decade 1988 1999Structural Adjustment ProgramAlthough SAPs are designed for individual countries but they have common guiding principles and features which include:

Export led-growthPrivatisationLiberalisationEfficiency of free market

The Lost Decade 1988 1999SAPs generally requires countries to:

Devalue their currencies against the dollarLift import and export restrictionsBalance their budgets and not overspendRemove price controls and state subsides

The Lost Decade 1988 1999 SAPs focus on improving the balance of payment position, cutting the fiscal deficit, lowering inflation and increasing growth:

Arenas around which these policies resolve are:Trade policyFiscal policyPublic enterprisesFinancial sectorIndustrial policyAgriculture

The Lost Decade 1988 1999IMF arrangements with Pakistan(Standby, extended, structural adjustment, and enhanced structural adjustment arrangements)Date of arrangementType of arrangementDate of expiration or cancellationAmount agreed (SDRm)Amount Drawn (SDRm)Undrawn balance (SDRm)8-Dec-58Standby12-Sep-6925.00-*25.0016-Mar-65Standby16-Mar-6637.5037.50-17-Oct-68Standby16-Oct-6975.0075.00-18-May-72Standby17-May-73100.0084.0016.0011-Aug-73Standby10-Aug-7475.0075.00-11-Nov-74Standby10-Nov-7575.0075.00-9-Mar-77Standby8-Mar-7880.0080.00-24-Nov-80EFF1-Dec-811,268.00349.00919.002-Dec-81EFF23-Nov-83919.00730.00189.0028-Dec-88Standby30-Nov-90273.15194.4878.6728-Dec-88SAF27-Dec-91382.41273.15109.2616-Sep-93Standby15-Sep-94265.4088.00177.4022-Feb-94EFF21-Feb-97379.1080.55298.5522-Feb-94ESAF21-Feb-97606.60101.10505.50* Cancelled prior to expiration dateEFF = Extended Fund FacilitySAF = Structural Adjustment FacilityESAF = Enhanced Structural Adjustment FacilitySource: Pakistan Journal of Applied Economics, Vol 22, nos 1 and 2, 1995, p. 81The Lost Decade 1988 1999With respect to Pakistan, the key objectives of SAPs for 1990s decade was:

Reduce the overall budgetary deficit to:6.5% of GDP in 1988-95.5% of GDP in 1989-904.8% of GDP in 1990-91

Contain the rate of inflation to:10% in 1988-9 7% in 1989-906.5% in 1990-91

Reduce the external current account deficit to:3.4% of GDP in 1988-92.8% of GDP in 1989-902.6% of GDP in 1990-91

The Lost Decade 1988 1999With respect to Pakistan, the key objectives of SAPs for 1990s decade was:

Increase official foreign exchange reserves:From equivalent of about three weeks of merchandise imports to about seven weeks of imports by 1990-1

Contain the growth of domestic credit and money supply:In line with the growth of nominal GDP at the target rate of inflation

SAPs include 12 industrial and 5 macroeconomics points

The Lost Decade 1988 1999

The Lost Decade 1988 1999 Growth Rates in Pakistan (average annual, %)1960s1970s1980s1990s GDP6.774.846.454.6 Agriculture5.072.375.444.4 Manufacturing9.935.58.214.8 Commodity - producing Sector6.833.886.494.6 Service Sector6.746.266.654.6 Source: Government of Pakistan, Pakistan Economic Survey, various issues, IslamabadThe Lost Decade 1988 1999 Agricultural Sector6.654.6

The Lost Decade 1988 1999 Agricultural Sector Income as % of GDP6.654.6

The Lost Decade 1988 1999 Industry Sector6.654.6

The Lost Decade 1988 1999 Industry Sector Income as % of GDP

The Lost Decade 1988 1999 Manufacturing Sector

The Lost Decade 1988 1999 Manufacturing Sector Income as % of GDP

The Lost Decade 1988 1999 Services Sector

The Lost Decade 1988 1999 Services Sector Income as % of GDP

The Lost Decade 1988 1999Fiscal Deficit Calculated as the difference between the taxes collected by the govt. and the govt. spending It can be a surplus (or deficit) Most governments try to keep their deficits below 3% of GDP

The Lost Decade 1988 1999Fiscal Deficit

The Lost Decade 1988 1999Federal Government Revenue Receipts( Million Dollars )ReceiptFY90FY91FY92FY93FY94FY95FY96FY97FY98FY99A. Revenue (1+4)163,525170,344216,586242,619273,239321,323370,509384,263433,636464,3721. Total Taxes and Surcharges (2+3)114,004124,311156,604170,977199,073247,209292,912309,427343,519386,8472. Total Taxes104,264112,016141,801158,766172,589226,499268,033282,110293,631308,509i. Direct Taxes14,94219,84028,84736,76243,45161,58578,15285,051103,182110,207a. Taxes on Income14,33719,05027,91335,01841,46659,20575,81680,40597,162103,212b. Wealth Tax391602628-1,2161,6301,4062,4113,5363,502c. Workers Welfare Tax2141883061,74434975040075010182169d. Capital Value Tax420-530148514661324ii. Indirect Taxes89,32292,176112,954122,004129,138164,914189,881197,059190,449198,302a. Customs50,66550,52861,82163,22564,24077,65288,90886,09474,49665,292b. Central Excise23,08224,73930,33435,16934,51943,69151,10455,29762,01160,905c. Sales Tax15,57516,90920,79923,61030,37943,57149,86955,66853,94272,1053. Surcharges9,74012,29514,80312,21126,48420,71024,87927,31749,88878,338i. Petroleum4,8999,0527,5123,83717,20012,49015,12722,47643,52466,395ii. Natural Gas4,8413,2437,2918,3749,2848,2209,7524,8426,36411,9434. Non-Tax Revenue49,52146,03359,98271,64274,16674,11477,59774,83590,11777,525i. Property & Enterprises32,22326,95737,36335,76741,86738,42843,31750,03848,83050,077ii. Civil Administration5,9284,7551,88412,7876,44016,78016,11015,27623,44011,132iii. Miscellaneous11,37014,32120,73523,08825,85918,90618,1719,52117,84816,316B. Transfers to Provinces30,87833,79257,98665,08780,10597,727121,310131,556114,419121,854Net Revenue Receipts (A-B)132,647136,552158,600177,532193,134223,596249,200252,707319,217342,217Source: Handbook of Statistics on Pakistan Economy 2010The Lost Decade 1988 1999Federal Government Expenditures( Million Dollars )ExpenditureFY90FY91FY92FY93FY94FY95FY96FY97FY98FY99 A. Revenue (1+2)165,240189,277212,231248,536268,025315,716382,674414,454466,501529,025 1. Curent148,874177,784197,044234,405255,862293,085356,242397,104450,601515,372 i. General Administration6,5437,61410,29111,01916,05217,00818,89220,67719,32718,501 ii. Defence58,70864,62375,75187,46191,776104,512119,658127,441131,353143,471 iii. Law & Order3,3853,5324,4764,6805,3647,0927,2177,1698,0185,688 iv. Community Services2,5332437272135294,2805,0234,9714,9235,8849,533 v. Social Services 5,101 571460447,628745289259064900388918149 vi. Economic Services 1,010 5983183242841842196727642038288016324 vii. Subsidies 7,092 819464385911397847627982684363754961 viii. Debt servicing, Funds & Grants64,49662,82978,84196,970114,382128,058165,917203,061247,669290,691 ix. Grants to Provinces-13,1767,9369,2367,27811,70012,5349,56815,3829,607 x. Unallocable63,6822,7143,6873,4584,0387,2436,3814,8248,447 2. Development16,36611,49315,18714,13112,16322,63126,43217,35015,90013,654 B. Capital Disbursements (1+2)57,71970,861114,39786,13996,296106,047124,201135,380125,902156,984 1. Current Expenditures19,83920,72745,00217,89020,06233,19348,02559,31039,17959,312 2. Development Expenditures37,34050,13469,39568,24976,23472,85476,17676,07086,72397,672 Total Expenditures (A+B)222,419260,138326,628334,675364,321421,763506,875549,834592,403686,009 Source: Handbook of Statistics on Pakistan Economy 2010The Lost Decade 1988 1999Balance of Trade1( Million Dollars )PeriodExportsRe-exportsImportsRe-importsBalance of Trade2FY 884,457.2051.66,395.203.7-1,890.10FY 894,693.2045.57,069.403.1-2,333.80FY 904,964.7056.16,941.101.7-1,922.00FY 916,167.0051.27,631.202.7-1,415.70FY 926,912.2046.59,253.302.8-2,297.40FY 936,819.3034.19,963.201.8-3,111.60FY 946,812.8026.98,561.603.9-1,725.80FY 958,137.2035.410,394.403.1-2,224.90FY 968,707.103911,804.904.4-3,063.20FY 978,320.3068.311,894.2016.5-3,522.10FY 988,627.7076.310,118.004.6-1,418.60FY 997,779.3070.19,431.7014.2-1,596.501.Actual Data was in Pak Rs. Converted in equivalent2.Balance of Trade = Exports + Re-exports - Imports - Re-importsSource: Federal Bureau of StatisticsThe Lost Decade 1988 1999Balance of Trade1( Million Dollars )The Lost Decade 1988 1999 Inflation

The Lost Decade 1988 1999 Inflation

The Lost Decade 1988 1999Financial Sector:

Monetary Policy Policies were to be undertaken to abolish negative real interest rates on concessional credit programmes and efforts were to be made to free interest rates in the market for medium and long term credit, making interest rate more responsive to market conditions rather than being under the control of the government.

The Lost Decade 1988 1999Pakistan economic sanctions by U.S after the 1998 nuclear testing were imposed under different amendments:

1994 Glenn Amendment1985 Pressler Amendment1977 Symington AmendmentSanctions imposed as Clinton administration policy

The Lost Decade 1988 1999 Conclusion

In the 1990s era, several governments changed hands and each criticized the economic policies of the previous government but continued similar policies during their own period.

Also IMF and World Bank through their implementation of SAPs did not contributed positively in the economic performance of Pakistan

The Lost Decade 1988 1999 Conclusion An effective economic policy framework cannot be evolved and implemented in the absence of good governance.

The essential requirement for launching a program of sound long term economic management in Pakistan is the emergence and continuation of good governance, and of a stable and sincere government that adheres to: Rule of lawPromotes social and economic justiceEnsure peace and securityAdopt austerity measures and Strengthens institutional framework.

The Lost Decade 1988 1999