ABSTRACT

Like many other developing countries, Pakistan has attempted to pursue the path of internal and external (that is, current account but not so much capital account) liberalization and export-led growth in recent decades. The switch from an emphasis on import substitution to export-promotion, and from somewhat tepid support for the private sector to outright privatization of publicly-owned assets in Pakistan began in earnest with the structural adjustment program (SAP) signed with the International Monetary Fund (IMF) in 1988. However, the evolution of Pakistan’s economy has been markedly different from that of other successful exporters of manufactures in Asia, and even from the other industrializing countries in its neighbourhood. The differences can be attributed partly to the trajectory of domestic institutional development, and partly to the political economy of Pakistan’s external circumstances. This chapter investigates some of the recent economic developments in the Pakistani economy, explores the sources and sustainability of its recent growth patterns, and aims to shed some light on prospects over the short-to medium-term. Throughout the article, the emphasis is on developments in Pakistan’s international trade, current account, and fi nance regimes.