· Economic Issues
The total GDP per capita stood between 8.4% (in the 1970s) and 8.3% (in 1993–96), periods of nationalisation. Bhutto was an economist by profession; therefore during her terms as prime minister, she herself took charge of the Ministry of Finance. Bhutto sought to improve the country’s economy which was declining as time was passing. Benazir disagreed with her father’s nationalization and socialist economics. Soon after the collapse of the Soviet Union, Benazir attempted to privatize major industries that were nationalized in the 1970s. Bhutto promised to end the nationalisation programme and to carry out the industrialisation programme by means other than state intervention. But controversially Bhutto did not carry out the denationalization programme or liberalization of the economy during her first government. No nationalized units were privatized, few economic regulations were reviewed.
Pakistan suffered a currency crisis when the government failed to arrest the 30% fall in the value of the Pakistani Rupee from Rs. 21 to Rs. 30 compared to the United States dollar. Soon economic progress became her top priority but her investment and industrialisation programs faced major setbacks due to conceptions formed by investors based upon her People’s Party nationalisation program in the 1970s. By the 1990s, Khan and Bhutto’s government had also ultimately lost the currency war with the Indian Rupee which beat the value of Pakistan rupee for the first time in the 1970s. Bhutto’s denationalisation program also suffered from many political setbacks, as many of her government members were either directly or indirectly involved with the government corruption in major government-owned industries, and her appointed government members allegedly sabotaged her efforts to privatise the industries.
Overall, the living standard for people in Pakistan declined as inflation and unemployment grew at an exponential rate particularly as UN sanctions began to take effect. During her first and second term, the difference between rich and poor visibly increased and the middle class in particular were the ones who bore the brunt of the economic inequality. According to a calculation completed by the Federal Bureau of Statistics, the rich were statistically improved and the poor declined in terms of living standards. Benazir attributed this economic inequality to be a result of ongoing and continuous illegal Bangladeshi immigration. Bhutto ordered a crackdown on and deportation of illegal Bangladeshi immigrants. Her action strained and created tensions in Bangladesh–Pakistan relations, as Bangladesh Prime Minister Khaleda Zia refused to accept the deportees and reportedly sent two planeloads back to Pakistan. Religious parties also criticised Bhutto and dubbed the crackdown as anti-Islamic.
This operation backfired and had devastating effects on Pakistan’s economy. President Khan saw this as a major economic failure despite Khan’s permission granted to Bhutto for the approval of her economic policies. Khan blamed Bhutto for this extensive economic slowdown and her policy that failed to stop the illegal immigration. Khan attributed Bhutto’s government members corruption in government-owned industries as the major sinkhole in Pakistan’s economy that failed to compete with neighbouring India’s economy.
· Privatization and Era of Stagflation
The GDP growth rate was at ~4.37% in 1993, which fell to ~1.70% in 1996, before Bhutto’s dismissal.
During her second term, Bhutto continued to follow former prime minister Nawaz Sharif’s privatisation policies, which she called a “disciplined macroeconomics policy”. After the 1993 general elections, the privatisation programme of state-owned banks and utilities accelerated; more than Rs.42 billion was raised from the sale of nationalised corporations and industries, and another US$20 billion from the foreign investment made the United States. After 1993, the country’s national economy again entered in the second period of the stagflation and more roughly began bite the country’s financial resources and the financial capital. Bhutto’s second government found it extremely difficult to counter the second era of stagflation with Pressler Amendment and the US financial and military embargo tightened its position. After a year of study, Bhutto implemented and enforced the Eighth Plan to overcome the stagflation by creating a dependable and effective mechanism for accelerating economic and social progress. But, according to American ambassador to Pakistan, William Milam’s bibliography, Bangladesh and Pakistan:Flirting with Failure in South Asia, the Eighth Plan (which reflected the planned economy of the Soviet Union) was doomed to meet with failure from the very beginning of 1994, as the policies were weak and incoherent.
On many occasions, Bhutto resisted to privatise globally competitive and billion-dollar-worth state-owned enterprises (such as Pakistan Railways and Pakistan Steel Mills), instead the grip of nationalisation in those state-owned enterprises was tightened in order to secure the capital investment of these industries. The process of privatisation of the nationalised industries was associated with the marked performance and improvement, especially the terms of labour productivity.A number of privatization of industries such as gas, water supply and sanitation, and electricity general, were natural monopolies for which the privatization involved little competition. Furthermore, Benazir denied that privatisation of the Pakistan Railways would take place despite the calls made in Pakistan, and was said to have told Planning Commission chief Naveed Qamar, “Railways privatization will be the ‘blackhole’ of this government. Please never mention the railways to me again”. Bhutto always resisted privatisation of United Bank Limited Pakistan (UBL), but its management sent the recommendation for the privatisation which dismayed the labour union. The United Group of Employees Management asked Bhutto for issue of regulation sheet which she denied. The holding of UBL in government control turned out to be a move that ended in “disaster” for Bhutto’s government.