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The Role of Infrastructure in Pakistan's Economic Development, 1972-1991

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Journal article

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For most of the 1980s, the Pakistan economy performed well, with Gross Domestic Product GDP increasing by over 6 per cent per annum. However, the latter part of the decade was characterized by increasing fiscal and external deficits, infrastructure deficiencies and disruptions in production. In 1989 the Government initiated a three-year structural adjustment program with the assistance of the International Monetary Fund IMF. The program sought to redress the growing macroimbalances. resulting from large fiscal deficits. and to increase productivity through major structural reforms in the real as well as the financial sectors. By the late 1980s fiscal imbalances resulted in the public sectors gross fixed investment declining in real terms in both 1988 and 1990. In fact a relative decline in the growth in public sector investment occurred throughout the 1980s. so that by the end of the 1980s the growth in capital formation was the lowest in the countrys history. The limited expansion of public sector investment is particularly disturbing in lieu of the fact that the countrys stock of infrastructure is modest even by third world standards. Clearly, if a stable relationship exists between increases in social overhead capital and private sector capital formation then the likely declines in public investment stemming from current austerity programs may have severe consequences for the nations development process. The purpose of this paper is to examine the consequences of declining public sector investment in Pakistan. Specifically, we are interested in examining the impact on the economy of these trends in infrastructural investment. Has investment in this area acted primarily to increase output or has it stimulated private sector investment Alternatively, has public infrastructure been passive, largely responding to obvious needs created by growth of private sector capital formation

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  • Economics and Cost Analysis
  • Government and Political Science

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