Economic Reforms in Pakistan: One Step Forward, Two Steps Backwards (The Quaid-i-Azam Lecture)

In 1998 I was invited by Dr Sarfraz Qureshi, the then Director of PIDE to deliver a lecture on “The Political Economy of Reforms: A Case Study of Pakistan”.1 This lecture was subsequently published by PIDE as a monograph. A year later, in December 1999, I had the honour of becoming the Governor of the State Bank of Pakistan and actually participated actively in the formulation and implementation of economic reforms. During the six year period of public policy making I realised that my knowledge about the political economy as manifested in my PIDE lecture was incomplete. The narrative was more complex than I had developed as an outsider. Now, six years later after my retirement from the State Bank of Pakistan I again reflected upon this topic as an observer and analyst rather than a participant. I realised that my learnings have become much richer by applying these different prisms—those of an international development economist, a public policy-maker and now an independent analyst. I am grateful to Dr Rashid Amjad and Dr Musleh ud Din and their colleagues at PIDE for providing me this opportunity to share these learning with my colleagues, peers and other scholars present here today. The political economy of economic reforms and structural adjustment has become focus of growing attention in the literature drawing at the inter-disciplinary tools of analysis and cross-country comparative perspectives. Detailed case studies of country situations do throw useful insights which are not captured through cross-country studies. The key question that is explored by this group of researchers is: if policy and institutional reforms are associated with high economic pay offs, then why are these reform programmes not sustained and implemented consistently? Why are they derailed? I would like to focus the discussion on Pakistan only and address the following questions: