Recent Macroeconomic Developments and Implications for Poverty and Employment in Pakistan

The performance of Pakistan’s economy has been impressive for some time. The economy grew at over 6 per cent per annum between 1960 and 1987. Capital inflows, particularly foreign aid and overseas worker’s remittances, have been substantial. These trends brought prosperity and resulted in a substantial decline in poverty from 40 per cent in the 1960s to about 17 per cent in the late 1980s. However, the economic growth rate declined to around 4 per cent during the 1990s, which resulted not only in high unemployment but also in higher incidence of poverty and inequality in the country. Over the last decade, the country pursued a number of IMF/World Bank structural programs because of the financial assistance sought from these institutions. Over the last four years, Pakistan followed two IMF programs — a Stand-by Arrangement in 2000 and Poverty Reduction and Growth Facilities (PRGF) during 2001–04. While policies pursued under these programs are primarily aimed at reducing the fiscal deficit, enhancing exports and improving governance, it has also been argued that these policies could reduce poverty.