Rethinking the Development Model

Abstract

he Pakistan Institute of Development Economics (PIDE) has recently launched a framework of economic growth titled “The PIDE Reform Agenda for Accelerated and Sustained Growth”. The Reform Agenda points out that Pakistan has had a rough economic growth journey since independence due to intrinsic flaws in the development model which the country is still following. A rethinking of the development model and reconfiguring the role of the government is imperative to achieve a higher and sustainable growth that is indispensable for employment generation and debt sustainability.

Over the last seventy-two years, the economic growth of Pakistan has remained volatile and has fluctuated widely. Likewise, the long-term growth shows a downward trend (see Figure below). Investment and productivity are the key determinants of economic growth, unfortunately, the dismal performance of Pakistan on both these fronts has contributed to the decline in long-term growth. The sporadic growth experience of Pakistan raises two fundamental questions, One, why Pakistan’s growth episodes are not sustained and two, what are the basic constraints to economic growth in Pakistan? This brief seeks to address these two issues.