Mexico 1994, Pakistan 1996?
A confidential informal note being circulated in the World Bank seeks to compare the economic situation in Pakistan today with that availing in Mexico prior to the economy crash in 1994. To quote “Over the last three years, Pakistan’s macroeconomic performance has been disappointing. Real income per capita has hardly grown, while inflation and urban unemployment have risen. Although the country’s long-term growth potential remains favourable, prospects for sustained non-inflationary growth of per capita income are fraught with serious downside risks. The economy remains overly dependent on the cotton sector and highly vulnerable to external shocks and financial instability. Because of the unfavourable economic performance, there has been a noticeable rise in social and political pressures and loss of popularity for the current government. Concerned about potential short-term adverse impact of economic adjustment or key interest groups, the government decided in June 1995 to slow down the pace of reforms. However, this decision led to loss of credibility of government’s macroeconomic policies, emergence of serious fiscal and financial imbalances and eventually financial turbulence. Although the authorities are now trying to steer the economy back on track, and thanks to cotton’s bumper crop economic growth is forecast to accelerate, nevertheless, Pakistan’s macroeconomic/financial problem is much more serious than assumed by the authorities.” unquote. All in all, this is rather a damning indictment of Ms Benazir regime’s economic policies.
