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April 18, 2021

Political stability

Opinion

April 18, 2021

There can be no real economic growth without political stability. In an empirically-driven study, a “sample covering 169 countries, and five-year periods from 1960 to 2004”, it was empirically determined that “higher degrees of political instability are associated with lower growth rates of GDP per capita.” Here’s the record from Pakistan.

1947-1958: PM Khawaja Nazimuddin dismissed via a ‘governor-general’s coup’ and Mohammed Ali Bogra, Pakistan’s ambassador to the United States, took his place. Four governors-general and a president. Political instability and the resulting low economic growth of around 3 percent.

1958-1969: General Ayub Khan’s eleven years of political stability, a period referred to as the ‘The Golden Sixties’. Sustained political stability and the resulting high economic growth that reached 10.42 percent in 1965 and later peaked out at 11.35 percent in 1970 (the highest ever). In 1968, the rate of inflation was recorded at 0.171 percent. Political stability resulting in industrial expansion, a ‘green revolution’, high economic growth and low inflation.

1971-1977: Zulfikar Ali Bhutto’s nationalization, supported by populist policies, brought down economic growth to around 3 percent. In 1974, the rate of inflation hit a high of 26.6 percent, the highest ever. So, low economic growth and high inflation.

1977-1988: General Ziaul Haq’s eleven years of political stability gave us our history’s second-highest rate of economic growth of 10.2 percent in 1980. In 1986, the rate of inflation was recorded at 3.5 percent. Political stability resulting in high economic growth and prices under control.

1988-1999: Benazir Bhutto, Ghulam Mustafa Jatio, Nawaz Sharif, Balakh Sher Mazari, Nawaz Sharif (second time), Moeen Qureshi, Benazir Bhutto (second time), Miraj Khalid and Nawaz Sharif (third time). Imagine, 11 years and 9 prime ministers. By 1997, our economic growth had hit a low of one percent with the rate of inflation hovering around 12 percent.

1999-2007: General Musharraf’s eight years of political stability resulted in economic growth of 7.5 percent in 2004. The rate of inflation saw a low of 2.9 percent in 2003 and a high of 9 percent in 2005.

2007-present: Mohammad Mian Soomro, Yousaf Raza Gilani, Raja Pervez Asharaf, Mir Hazar Khan Khoso, Nawaz Sharif (fourth time), Shahid Khaqan Abbasi and finally Imran Khan. Extreme political instability turning into politics of revenge where political actors are bent upon eliminating each other – as opposed to competing with each other. Inflation peaked out at 20 percent in 2008 and economic growth peaked out at 5.8 percent in 2018. In 2020, we actually experienced negative growth of 0.4 percent – and that was for the first time in 68 years (since 1952).

Plan B: We cannot do without economic growth. And, we must have political stability for economic growth to take place. Extreme political instability, a high rate of inflation and low growth are all first cousins. Pakistan’s current status quo has three elements: extreme political uncertainty, a high rate of inflation and low economic growth. This status quo can only be sustained at a very high economic cost. Pakistan needs governments that focus on economics, not just politics. Pakistan needs governments that favor political reconciliation over confrontation. Pakistan needs governments that are doers, not just propagandists.

The writer is a columnist based in Islamabad.

Email: [email protected] Twitter: @saleemfarrukh