Musharraf Tenures Economic Analysis

It was a date of 12th October 1999, when General Pervaiz Musharraf took the power of governance from the democratic government of former Prime Minister Nawaz Sharif. Pakistan at that time was facing a lot of economical challenges, stock markets were crashed. At that time President Musharraf came up with his 8 point agenda which promises for economic betterment in the country. As Musharrafs government came, Pakistan had some real and good economic growths in terms of GDP and other economic indicators. As GDP is the average of other growths of other sectors, it increases with the rise in components of economic sectors. In 2003, Pakistan have 8% GDP growth, as banking sector and automobile sector growth grows 29% and 45% respectively. These growths re-establish far better economic condition of country as per the economic statistics. The growth of these sectors were very positive signs for the economy, but the question arises, are these growths in service and manufacturing sector were the real growths from the resources of the country? If we analyze the policies, we see that the growth was actually due to the monetary expansion. Government increase artificial money supply in the market that caused for the growths in banking and automobile sector. The step taken by the government was that they allow consumer financing from the commercial banks. From that, people got loans for their personal consumptions such as loans for cars, home, fridge and others; therefore, banks made high profits through consumer credits and their profit was the part of GDP. The major portion of credit allocation from banks was for cars that causes the increase in automobile sector. Banking sector is a part of service sector that contributes for more than 50% of GDP, similarly automobile sector is a part of manufacturing sector; therefore, their growth increases the growth of major service and manufacturing. While on the other hand, agriculture sector growth was not so good. We have observed those growth rates, the reasons for that are the increase in artificial money supply. In initial years, inflation was low because of the excess manufacturing capacity in the respected sector. Gradually money supply balances with demand, but demand continue to increase while supply was not increasing as much, people still using consumer credit through different ways such as credit card shopping that cause for increase in prices later. This step from the Musharrafs government not only causes for inflation in the country and trade imbalance as well as imports continues to increasing with stagnant exports. After that, we have some other problems as well that comes from privatization policy of that time and also the problem of power crisis arises. Because Musharrafs policy for investment was attractive for investing in stocks and equities that does not required by these companies to build them high but it ensures the favorable statistics in the stock markets.

In conclusion, I will say that economy in Musharrafs government grows but that growth was due to increase in money supply, it was not the improvement of respected sectors which caused major problems for the next Government. By: Waqas Hassan