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Published:Sept 2008
This paper gives a brief overview of Pakistan’s economic growth
over the past decades and critically examines the economic policies of the
last government. It draws attention to the unchecked state dominance
across all sectors of the economy and emphasizes the need for further
privatization. The paper concludes with some suggestions on the way
forward towards growth and economic prosperity.
KEYWORDS:
Privatization, Economic Policy, Economic Growth.
JEL:
O43,
L33,
Q58.
Rethinking Pakistan’s Development Strategy
Naved Hamid
Published:Sept 2008
The objective of this paper is to set out the key components of a
development strategy for Pakistan. A fundamental premise of our analysis is
that the world economic environment is changing dramatically and a
development strategy today must position itself to take advantage of the
changes taking place. The paper is divided into five sections: First, we
provide a brief review of Pakistan’s experience with development strategies
so far. Next, we discuss the changes that have occurred, or are taking
place in the global economy, which have strategic relevance for Pakistan.
In the third section we look at the current situation in Pakistan with
regard to the potential drivers of growth, based on the earlier discussion of
the global developments. In the final section key elements of an alternative
development strategy for Pakistan are outlined.
KEYWORDS:
Development Strategy, Growth, Globalization.
JEL:
O40,
O20,
O11.
An Exploratory Analysis of Inflation Episodes in Pakistan
Riaz Riazuddin
Published:Sept 2008
This paper explores the past 50 years of data on inflation, growth
rates of money and real GDP. It is found that inflation is primarily a
monetary phenomena; however, the quantity theory of money does not
hold in Pakistan below money supply growth rates of 9 percent. A simple
monetary rule is also derived by inspecting the maximum probabilities of
keeping inflation low (at most 6 percent); this rule is simply to keep
money growth rates below 12 percent. This paper also finds that food
inflation too is a monetary phenomena and there is no trade-off between
inflation and growth, which are independent in the sense of probability
measures. The findings are confirmed by the application of Fisher’s Exact
Test. The policy implication is that monetary policy should be pursued
independently of growth policies of government.
KEYWORDS:
Pakistan, Inflation, Monetary Policy.
JEL:
E52,
E41.
Public Policy Fundamentals for Sustainable and Inclusive Growth
Ijaz Nabi
Published:Sept 2008
Pakistan has seen strong economic growth in recent years
accompanied by a reduction in poverty. However, growth has been
concentrated, which has meant that regional and inter-personal disparities
are on the rise. In a contestable political environment, this casts a shadow
on the sustainability of high growth. The budget, a corrective instrument,
has been subject to boom and bust cycles because of rigid claims, poor tax
effort and external shocks, rendering it ineffective in addressing long term
priorities. This paper argues that robust budgets for sustained and
inclusive growth require government programs to be credible (monitoring
and evaluation and public information) and cost effective (streamlined
budget cycle, public-private partnerships); this will help increase citizen
willingness to pay for public programs via improved tax compliance.
KEYWORDS:
Pakistan, Budget, Growth.
JEL:
E22,
O43,
E23.
The Effects of Rising Food and Fuel Costs on Poverty in Pakistan
Theresa Thompson Chaudhry and Azam Amjad Chaudhry
Published:Sept 2008
The dramatic increase in international food and fuel prices in
recent times is a crucial issue for developing countries and the most
vulnerable to these price shocks are the poorest segments of society. In
countries like Pakistan, the discussion has focused on the impact of
substantially higher food and fuel prices on poverty. This paper used PSLM
and MICS household level data to analyze the impact of higher food and
energy prices on the poverty head count and the poverty gap ratio in
Pakistan. Simulated food and energy price shocks present some important
results: First, the impact of food price increases on Pakistani poverty levels
is substantially greater than the impact of energy price increases. Second,
the impact of food price inflation on Pakistani poverty levels is significantly
higher for rural populations as compared to urban populations. Finally,
food price inflation can lead to significant increases in Pakistani poverty
levels: For Pakistan as a whole, a 20% increase in food prices would lead to
an 8% increase in the poverty head count.
KEYWORDS:
Pakistan, Poverty, Inflation, Household Budget, Food, Fuel.
JEL:
D33,
R21,
E3.
Does the Labor Market Structure Explain Differences in Poverty in Rural Punjab?
Rashid Amjad, G.M. Arif and Usman Mustafa
Published:Sept 2008
The main focus of this study is Rural Punjab and it contributes to
regional poverty research in two ways; first, using a more recent household
survey data, carried out in August 2007 by the Pakistan Institute of
Development Economics (PIDE), it provides fresh poverty estimates for the
rural areas of the Punjab. Second, the poverty differential across the agroclimatic
zones of Punjab have been explained by urbanization, overseas
migration and the labor market structure operating in these zones. This
study shows four major factors that explain inequalities in poverty levels.
First, the rural areas of two zones, barani and rice/wheat, are well
integrated with urban settings. This integration has allowed their rural
populations to work in the industrial sector of Central Punjab and the
services sector in North Punjab primarily Rawalpindi and Islamabad.
Second, the belt from Lahore to Attock in the Punjab has benefited the
most from overseas migration. The flow of remittances has helped in
reducing poverty levels. Third, the cotton/wheat and low intensity zone still
largely depend for employment on the agricultural sector while this
dependency is very low in the barani zone, which has good opportunity to
seek job opportunities for its labor force in the armed services and
government departments. Finally, demographic and social factors including
education are less favorable in the cotton/wheat and low intensity zones
which negatively impacts on a breakthrough in poverty reduction.
KEYWORDS:
Pakistan, Poverty, Migration, Labor Market.
JEL:
D33,
J20,
J61.
The Geography of Poverty: Evidence from the Punjab
Ali Cheema, Lyyla Khalid and Manasa Patnam
Published:Sept 2008
The article is the first comprehensive attempt at estimating the
variation in the incidence, intensity and severity of poverty in the Punjab
at the level of sub-provincial regions and districts. This estimation has
been made possible because of the availability of the Multiple Indicators
Cluster Survey (2003-04), which has a sample that is representative at the
district-level. Estimates suggest the existence of a high poverty enclave in
the south and the west regions of the Punjab. The incidence and severity of
poverty in a majority of districts in this enclave, with a few exceptions, is
extremely high with one out of every two households being poor on average.
The high levels of poverty in this enclave contrast with the relatively low
poverty in the more urbanized north, where households are well integrated
into the national and international labor market. The paper also argues
that there is tremendous variation in the poverty experience of the districts
in the centre. Poverty incidence in the more urbanized and industrialized
northern districts of the centre contrasts sharply with the experience of
Kasur, Okara and Pakpattan, where the incidence and severity of poverty
is extremely high. Finally, we find that in nine districts rural households
do much worse in terms of poverty incidence than their urban
counterparts. The gap between urban and rural poverty incidence and
severity is highest within the district of Lahore suggesting that
urbanization co-exists with a large poor population that inhabits the periurban
areas of the district. An important aim of development policy and
poverty targeting is to bridge these multi-faceted divides in the geography
of poverty.
KEYWORDS:
Poverty, Pakistan.
JEL:
I32,
D33.
Rethinking Development Strategy –The Importance of the Rural Non Farm Economy in Growth and Poverty Reduction in Pakistan
Sohail Jehangir Malik
Published:Sept 2008
The structural transformation of Pakistan’s economy has not been
accompanied by a concomitant decline in the proportion of labor employed
in agriculture. While this transformation has resulted in a non-farm sector
that is large and growing it has not lead to the rapid absorption of the
pool of relatively low productivity labor away from the agriculture sector,
as predicted by conventional development theory embodied in the models of
the 1960s. Despite the obvious importance of the role of a vibrant rural
non-farm economy (RNFE), and in particular, a vibrant non-farm services
sector to address the challenges of poverty, food security, agricultural
growth and rural development, this sector has received inadequate
attention in the debate in Pakistan. Based on a review of literature and
data from two large surveys – the Rural Investment Climate Survey of
Pakistan 2005 and the Surveys of Domestic Commerce 2007 – this paper
attempts to analyze the factors underlying the low level of development of
the rural non farm economy and the potential role it can play in Pakistan’s
economic development.
KEYWORDS:
Pakistan, Poverty, Rural, Development.
JEL:
R23,
R11.
Trends in Regional Inequalities in Pakistan: Evidence Since 1998
Sajjad Akhtar
Published:Sept 2008
Periodic research and documentation of the extent and nature of
inter-regional and intra-regional inequalities is a pre-requisite for
formulating cost effective interventions for the promotion of spatially
balanced and sustainable development. These interventions can be in the
shape of increased fiscal resource transfers and/or fiscal incentives to the
private sector for promoting investments in lagging regions. The analysis of
inter-regional and intra-regional consumption and non-consumption
inequalities in this paper are a preliminary attempt at assessing their
status.
KEYWORDS:
Pakistan, Inequality, Consumption, Social Indicator.
JEL:
D31,
E21.
Human Capital and Economic Growth: Pakistan, 1960-2003
Qaisar Abbas, James Foreman-Peck
Published:Jan - June 2008
This paper investigates the relationship between human capital and
economic growth in Pakistan with aggregate time series data. Estimated
with the Johansen (1991) approach, the fitted model indicates a critical
role for human capital in boosting the economy’s capacity to absorb world
technical progress. Much higher returns, including spillovers, to secondary
schooling in Pakistan than in OECD economies is consistent with very
substantial education under-investment in Pakistan. Similarly, extremely
large returns to health spending compare very favorably with industrial
investment. Human capital is estimated to have accounted for just under
one-fifth of the increase in Pakistan’s GDP per head. Since the 1990s, the
impact of deficient human capital policies is shown by the negative
contribution to economic growth.
KEYWORDS:
Human Capital, Economic Growth, Cointegration, Pakistan.
JEL:
O53.