In recent decades, Pakistan’s economy has experienced inconsistent growth and been confronted with repeated crises. Pakistani Finance Minister Abdul Hafeez Shaikh spoke on the myriad challenges his government has faced, its work to overcome them, and future plans to ensure long-term and equitable growth in Pakistan. Carnegie’s Ashley J. Tellis moderated.
From Bust to Boom
- A Difficult Past: In 2008, Asif Ali Zardari’s new government inherited an economy in shambles, Shaikh said. It faced a number of problems, including dismal growth rates, double-digit inflation, record deficits, and a crippled financial market.
- Much-needed Reforms: Restructuring the Pakistani economy so that its private sector can compete and thrive is the core goal of Islamabad’s economic policies, Shaikh explained. To that end, the Zardari administration has undertaken some serious, and sometimes unpopular, reforms. He argued that by easing pricing regulations on petroleum, forging a deal with the International Monetary Fund, and creating a robust and independent regulatory infrastructure, Pakistan has taken big steps toward restructuring.
- A Clear Turnaround: Shaikh explained that these reforms are already starting to pay off, despite the devastating setback of the 2010 floods in Pakistan. Today, Pakistan enjoys 3.7 percent economic growth rate, its key price indices are in the single digits, and it has more than doubled its tax revenues since 2008—all while maintaining a very lean government.
Addressing Economic Inequality
- Reversing Old Trends: Shaikh recognized that some areas of Pakistan, including the Federally Administered Tribal Areas and the province of Balochistan, have historically fallen behind in terms of development and economic prosperity, with potentially destabilizing political consequences. He explained that addressing this regional inequality has been a major Pakistani priority in recent years, citing new policies that provide more federal resources to areas like these.
- Innovative Solutions: According to Shaikh, Pakistan has taken major steps toward the creation of an effective and efficient social safety net. He drew particular attention to Islamabad’s widely-praised coupling of its extensive biometric database with digital technology to streamline the disbursement of government benefits. Faster and more direct access to funds, Shaikh explained, helps empower low-income households—especially those headed by women—and provide much-needed capital infusions to rural areas.
The Way Forward
- Challenges Remain: Shaikh acknowledged that Pakistan still has work to do to keep its economy strong in the long term. In particular, its energy sector and publically-run industries like steel and rail are major targets for further development.
- Working with the Region: According to Shaikh, Pakistan realizes that success in the global economy depends on connections with foreign markets, and is accordingly working to build economic bridges with its neighbors. Shaikh pointed to trade agreements with Afghanistan as a boon for both countries’ ledger books and an investment in Afghanistan’s security, while Pakistan’s recent economic rapprochement with its old rival India may signal an even more important sea change.
- The Indispensable United States: Among Pakistan’s economic partners, Shaikh highlighted the United States as the most important, with a volume of trade in excess of $5 billion. Shaikh proposed that Washington and Islamabad build on what he called an already strong government-to-government relationship to spur crucial private sector exchanges between their two countries.