Pakistan’s economic history shows mixed performance over the past six decades with GDP growth rates varying between civilian rule and military regimes and also during different periods of the non-democratic set-up.

The economy grew by 6.8 per cent under the first military regime of Field Marshal Ayub Khan, slowed to 6.5 per cent over General Zia-ul-Haq’s period and dropped to an average of 5.5 per cent during President Musharraf’s tenure so far.

However, a study of the key economic and social indicators of two different periods-- the democratic rule (DR)(1989-1999) and the military regime (MR)(1999-2005) – shows that of 6 out of 28 variables, there is no significant difference in their group means. The remaining variables show some difference, with most of them worsening instead of improving during the current military rule.

The main conclusion of this study is that the current military regime has not performed significantly better as compared to the preceding civilian rule. Comparatively, the overall quality of life in terms of education, health, and poverty has also not improved significantly. In fact, it has remained stagnant or even worsened.

GDP: The average growth rate of GDP during the 17 years 1989-2005 was 4.6 per cent. Incidentally, during FY89-FY99, the GDP growth rate averaged 4.6 per cent while during FY00-05 it increased slightly to 4.8 per cent. Though there is no significant statistical difference between the two periods, there is a large variation in growth rates during the FY00-FY05. In the first three fiscal years,1999-2002 the average GDP growth was only 2.9 per cent, and it more than doubled during the next three years to 6.3 per cent- a jump of 3.4 per cent.

The acceleration in the growth rate is explained by events following 9/11, economic reforms and the re-basing on national accounts. The base year of measurement was changed from 1980-81 to 1999-2000. As a result of re-basing, the GDP estimates for 1999-2000 have improved from Rs2,952 billion to Rs3,529 billion--an increase of 19.5 per cent over the old base estimate. Thus, estimated agriculture sector performance improved by 18.5 per cent, industrial sector 18 per cent and the services sector by 21.9 per cent.

Per capita income has been estimated at $526 for the re-based year 1999-2000 as compared to $441 on the basis of 1980-61 base. Similarly, estimates of fixed investment have surged by 34.3 per cent to Rs607 billion over 1980-81 base estimates of Rs452 billion mainly due to improved coverage.

One can safely deduce that the 6.4 per cent GDP growth rate in FY04 and 8.4 per cent in FY05 are significantly over-stated. Unfortunately, the Economic Survey does not provide the data for these two years based on the common base year 1980-81 which would be the right basis of comparison for all the relevant data being analysed in this study.( See table 1)

Investment and savings: The total investment as percentage of GDP during the democratic era was 17.93 per cent, while under military rule it dropped to 17.07 per cent. The T-test and ANOVA test results show that there is no statistical difference between the two periods. The share of industry in GDP was relatively constant at 24.85 per cent of GDP for both periods. It was slightly higher at 25.59 per cent under civilian rule and dropped to 23.5 per cent under the military regime as the share of the services sector went up to 52 per cent. Over all, there was little variation during the two regimes

Savings as a percentage of GDP averaged 15.16 per cent for 17 years (1989-2005). It averaged higher during the military regime at 17.67 per cent and averaged lower at 13.79 per cent during the democratic era. It was 20.80 per cent in 2002-03 mainly after 9/11 because of increased remittances.

Defence spending: Though the volume of defence spending has been increasing every year, it, as a percentage of current expenditure and GDP, has been declining. The average defence spending ratio of current expenditure during (1989-2005) was 22.25 per cent. It was highest at 26.5 per cent in FY90 and lowest at 18.5 per cent in FY05.

The main reason for the reduction in defence spending as a proportion of current expenditure is due to ‘creative accounting’. Several items which are part of defence spending such as the salary and pensions of active and retired personnel of armed forces are included in the civilian budget.

Unemployment and inflation: There is significant statistical difference in the unemployment rate and Consumer Price Index in the two compared periods. The average unemployment rate during 1989-2005 was close to six per cent. During the civilian rule it averaged 5.19 per cent and increased to 7.52 per cent during the current military regime. Despite high growth rate like 8.4 per cent in 2004-05, and 6.40 per cent in 2003-04, the unemployment rate has increased which shows that the benefit of high growth rate is not benefiting the people. Unemployment touched the highest ever at 8.70 per cent in FY05. (see table 2)

The average inflation rate when measured by the consumer price index was 8.14 per cent during the last 17 years and 8.60 per cent when measured using the GDP deflator. It averaged close to 10 per cent during the democratic era and 4.75 per cent during the military regime.

Budget deficit: Budget deficit averaged 5.89 per cent of GDP during the last 17 years. It averaged close to seven per cent in the democratic era which is much larger than 3.95 per cent under the military regime. It was better contained within three to 4.3 per cent of GDP .

Trade: Exports as a part of the GDP was 12.92 per cent during 1989-2005. It was almost the same during the military regime at 12.95 per cent and the democratic era at 12.91 per cent. Export growth averaged 11.38 per cent during the military era and 5.45 per cent during democratic era.

Remittances: The average worker remittances as a ratio of GDP was 3.15 per cent during the last 17 years—civilian’s 3.13 per cent and military’s 3.21 per cent. So essentially, there is no difference in the workers remittances as a proportion of GDP during the two periods.

Foreign exchange reserves: Robust foreign exchange reserves position reduced vulnerability of the exchange rate and provided some stability to country’s currency value.

Education: Investment in education grew by 2.18 per cent of the GDP during the entire study period--- 2.28 per cent during civilian rule and two per cent during military regime. This important area was equally neglected by both civilian and military governments.

Health: The average growth rate of investment in health sector during the 17 years of study (1989-2005) was 0.7118 per cent. It was 0.74 per cent under civilian rule and 0.67 per cent under military regime. ( see table 3)

Poverty: During 1989-2005, the growth rate of poverty was 30.13 per cent. The average growth was 31.7 per cent under military regime and 29 per cent during the democratic rule. The definition of poverty differs from country to country. The level of poverty is defined by the government by the benchmark of rupee value of Rs25 a day or Rs748 a month-- enough to afford 2,350 calories a day. Anyone earning less than this is considered as absolute poor. (Table 4)