PAKISTAN in 1947 was a stunningly different place from the country we know now, so different that most of today’s young people would have trouble imagining it. The size, structure and potential of the economy are much different than was the case at the time of the country’s birth.

Pakistan’s economy, looked at in terms of its performance over the 61-year period since the country’s birth, has done well. Its GDP has increased at the annual average rate of 4.4 per cent with the result that the economy now is 18 times larger than what it was in 1947, and income per head of the population is four and half times higher. In 1947, what is Pakistan today had a population of 30 million. With the current size of population estimated at 162.5 million, there are now five and half times as many people living in the country as was the case at the time of birth.

However, economic progress was not even during this period. Pakistan has had as many periods of rapid economic growth as of sluggish performance. The economy grew rapidly over a period of 27 years, from 1960 to 1969, from 1977 to 1988 and, more recently, from 2002 to 2007. The average rate of growth during these periods was 6.3 per cent. For the remaining 34 years, the economy performed less well, growing at a rate of 3.8 per cent. The roller-coaster ride the economy followed was in large measure due to the availability of foreign capital flows.

Pakistan relied on external savings to augment the low rate of domestic savings. External savings were large whenever the United States needed Pakistan for strategic reasons. This was the case in 1960-69 when the country joined the US effort to stop the spread of communism; in the 1980s, when Pakistan joined the US in forcing the Soviet Union out of Afghanistan; and again in 2001-07 when Pakistan became the ‘frontline state’ in Washington’s ‘war on terror’.

In the case of Pakistan rapid economic growth was not a part of a paradigm shift as was the case with neighbouring India. In the mid-1980s, India began to reform its economy, dismantling the ‘licensing raj’ in favour of a more open economy. One important consequence was that India, after 1986, was able to climb out of the ‘Hindu rate of growth’ and move on to a higher growth trajectory. It has remained on that trajectory for the last 20 years whereas Pakistan’s seems poised to take another plunge, continuing with the roller-coaster ride of the past six decades.

Having seen its economy grow at seven per cent a year in the five-year period between 2002 and 2007, the country is likely to see a two to 2.5 percentage point decline in the rate of growth in 2007-08 and for a couple of years beyond.

This will happen for a number of reasons, including a possible decline in the quantum of external flows.

But even more important, weighing on the economy are serious macroeconomic imbalances: both fiscal and balance of payments deficits have increased to unsustainable levels. These have produced inflationary pressures, further exacerbated by the increase in world commodity prices.

There is need for an adjustment in the approach to economic management. What should be the direction of economic policies as new administrations at both the federal and provincial levels settle down?

There are basically two options: the government could do what it has always done in periods of crises in the past or it could attempt to restructure the economy to ensure progress along a trajectory that would ensure high rates of growth with significant impact on the incidence of poverty and distribution of income. On previous occasions, the governments usually focused on short-term measures rather than on long-term structural change.

This may be a good time to alter the stance and attempt to bring about a fundamental change in the structure of the economy.

It should be noted that the current economic downturn is different from some of the previous ones in that it has not been caused by a sudden and sharp decline in foreign flows that brought about previous reductions in growth. This time the crisis is largely the cause of internal dynamics reinforced by some developments in the world’s commodity prices. The present crisis is the result of the failure of the previous set of Islamabad-based policymakers to foresee the consequences for the economy of the model of development they had adopted.

That model placed the economy under the control of an unconstrained private sector with the state withdrawing so much to the sidelines that it failed to do what it must to maintain equilibrium.

The suspension in the legitimate role of the state has meant that the country was left with a number of serious problems. Among them are a tax system that yields resources for the government well short of the public sector’s need for investment thus continuing the economy’s dependence on external flows. There is a public educational system that does not educate and adequately train a very large number of young people. The system of public health does not provide adequate health care for the poor.

Ours is an economic system that does not produce enough jobs for a rapidly increasing work force. Our cities do not provide some of the basic needs of the citizenry.

Ours is an agriculture sector that, in spite of its size and endowments, is unable to feed a growing population. Our economic structure does not mesh with the structure of the global economy; and severe power shortages that have produced great suffering for the poor and dislocations for many parts of the economy.

Given the state of economic affairs, the government has to do three things simultaneously. It has to adopt policies of adjustment in order to restore macroeconomic stability; it has to reignite the process of growth so that it can be sustained over time; and it has to not only provide for the poor but also work to reduce their number and reduce income inequalities.

The government, in other words, has to work on both the immediate and the medium to long-term. Short-term measures and long-term strategic policy must support each other and take the country in the same direction. The budget for the financial year 2008-09 presented an opportunity for the new policymakers to set the country on a new track. But unfortunately it was not taken. Why I believe that another opportunity was lost is a question I will take up next week.

THE plight of Iraqi refugees is now worse than ever, with millions struggling to survive in desperate conditions and with little hope of finding sanctuary.

While the crisis continues, the world community, especially western countries, have not only failed to help but are also erecting fresh obstacles to prevent the dispossessed men, women and children from settling on their shores, says a new report by Amnesty International.

Many governments have attempted to justify their hardline stance by citing supposed improvements in the security situation in Iraq. But after a marked decline, the level of violence is rising again. The numbers killed each month fell from 1,800 in August 2007 to 541 in January 2008. However, in March and April alone, more than 2,000 people, mostly civilians, died during clashes between US and Iraqi government forces and the Shia militia Mehdi Army.

The Iraqi diaspora is now one of the largest in modern times, with more than two million people fleeing abroad. But the ferocious strife and the breakdown in law and order have led to another wave of about 2.7 million fleeing their homes but unable to escape the country. Many of these have moved to Baghdad, putting further strain on a shattered infrastructure and adding to the city’s sectarian tensions. The situation in terms of numbers and conditions for the displaced people has deteriorated dramatically in the past two years, Amnesty claims.

“The crisis for Iraq’s refugees and internally displaced is one of tragic proportions,” said the report. “Despite this, the world’s governments have done little or nothing to help, failing in both their moral duty and legal obligation to share responsibility for displaced people wherever they are. Apathy towards the crisis has been the overwhelming response.”

Iraq’s neighbouring states hosted the vast majority of the refugees following the invasion by US and British forces in 2003 with a handful — less than one per cent — making it to Europe and North America. But these continents, facing their own economic hardships, have imposed harsher barriers, while the affluent West has begun to deport asylum-seekers to Iraq because it is purported now to be reaching stability.

There have been one or two highly publicised returns of refugees from Syria last autumn, which do not reflect the situation on the ground. The reality is that there are huge numbers trying to leave Iraq using both legal and illegal means

The Iraqi government, attempting to show that it was getting on top of the security situation, and to stop the flow of educated people out of the country, has been lobbying states in the region to put up restrictions. For instance, Syria, which had taken in the largest proportion of refugees, stopped the hitherto free entry across the border towards the end of last year at the request of the Iraqi Prime Minister, Nouri al-Maliki. Jordan, which has also received a large number of those fleeing, imposed new visa requirements last month.

Britain, whose forces in Basra do not venture out from their base at the airport, has been a leading proponent of sending people back because it was “safe”. On 27 March, 60 people were flown back to Iraq following another 120 deported over the past three years. Sweden, which has until now followed a liberal policy on Iraqi refugees, referred 1,776 cases to the police for forcible return, and, in a test case, a decision by the migration board not to grant asylum to an applicant who has arrived from Baghdad on the basis that there is no “armed conflict” in Iraq has been confirmed.

Most of the refugees in countries bordering Iraq do not have the right to work. Many live on meagre handouts and dwindling savings. Those who end up working in the black economy are often cheated, and there has been a rise in cases of child labour and women being forced into prostitution.

The Independent on Sunday spoke to Rashid, 14, who supports his disabled father, mother and four brothers and sisters by doing manual work in Damascus. “I take any job I can. We need the money,” he said. “I sometimes start at six in the morning and do not get back home until eight or nine at night. I have worked as a labourer, selling chai, cleaning shoes. We come from Ramadi, and I used to go to school there. I would like to continue with my education, but I do not think that will be possible. I would also like to go back to Iraq, but we have nothing left there.”

The forced migration within Iraq is largely unreported, with families being uprooted from homes they had occupied for generations. The Independent on Sunday spoke to two families, one Shia, the other Sunni, about how they had to flee. In both cases, the horrors they endured have turned tolerance and friendship across the religious divide into sectarian hatred.

Um Samir al-Rawi, who is Sunni, lives with her two daughters, Saba, 33, and Hiba, 28, in a dark and dingy house in Khadra, a Sunni area where they had taken refuge after being driven out of their home in the previously mixed Jihad district. Mrs al-Rawi’s husband died in 2004, and their son, Samir, is in exile in Syria after being hunted by the Mehdi Army which had accused him of being an insurgent.

The al-Amiry family, who are Shias, fled their home in Ghazaliyah after it came under attack from Sunni gunmen. “They began killing Shias, saying we were unclean and they will dispose of us,” said Mr al-Amiry. “The government did nothing to protect us. Then one morning my daughter found an envelope on the doorstep with an AK47 bullet and a note telling us that we had 48 hours to get out.”

— © The Independent