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The present paper discusses three related topics. First, it carries a brief review of the existing deve
present policy is inadequate. Third, the ways are suggested to overcome these deficiencies in the l
40 years or so, and keeping in view the evolving academic consensus.
In the process, a sketch of writer's own thinking on how best a fertile development policy should sim
growth, macroeconomic stability, distributive equity, and poverty reduction is also presented.
The existent economic strategy has focused almost without exception on restoring macroeconomic
about the economy's long-run financial viability. This is intended to lower the inflation rate, build up
and external debt, cut down the budgetary deficit, and decrease the imbalance in the balance of pa
Central to the economic strategy is, however, a reduction of the domestic and external debt to a sus
twin deficits. Raising the growth rate of GDP takes a back seat in this economic regime.
The reason for this neglect is the anticipation that it will take care of itself once the budgetary and c
government report states: "There exists a strong negative relationship between fiscal deficit and ec
down once economic growth revives thanks to a lowering of the twin deficits and the implementatio
Although not stated thus, it follows as a logical corollary that employment will also eventually increa
unwarranted.
For, in all stabilization programs a let-up in the growth rate, an addition to the unemployment rate, a
necessary correctives of the economic "distortions" caused by financial profligacy. For instance, in E
deliberately sacrificed in the 1970's to achieve stabilization. Pakistan's case is no different. As inten
current account deficit has turned into a surplus of 2.6 per cent of GDP, for the first time in Pakistan
The inflation rate averaged at only 3.5 per cent in 2001-02, which too is the lowest level in the last 3
upsurge in domestic and external debts has been reversed: the domestic debt declined from 51 per
2001-02, and the external debt climbed down from 62 to 59 per cent of GDP during the same perio
This may not look too impressive. But because debt increases at a compound rate, even seemingly
cap it all, foreign exchange reserves have soared to a little over 10 billion US dollars, well beyond w