The country has seen two elected governments complete their terms since the last period of military rule ended in 2008. It’s a new milestone for its frail democracy.

This is in spite of a lot of political noise and turmoil that marked the decade under the civilian rule as certain elements asserted their powers to undermine the democratic process and politicians.

The economy also experienced extreme turbulence during this period because of a number of factors like perpetual political volatility, massive flooding across the country, global financial meltdown, steep reduction in official capital inflows owing to changing geopolitical realities, sharp decline in foreign and domestic private investment and dependence of policymakers on public and private consumption for propelling growth.

Each of the three governments voted into power since 2008 inherited a financial and policy mess, which forced them to turn to the International Monetary Fund (IMF).

In the last 10 years, economic growth remained anaemic, budget deficits widened, investment fell, exports decelerated and imports spiked sharply as the economy shuffled from one crisis to another — a phenomenon often explained by the experts as boom-and-bust cycles.

The public debt has surged steeply over time and the nation’s requirements for large capital inflows to meet its budget and debt financing needs are rising. The recent, sharp decrease in the purchasing power of middle-class households is compelling many of us to compare the economic performance of the civilian governments with that of the Musharraf regime in the 2000s when most middle-class families saw their disposable income grow significantly and rapidly.

Indeed, macroeconomic numbers show that the economy had performed much better under the dictatorial regime between 2000 and 2008. For instance, the economy grew at an average annual rate of 4.53 per cent, private credit off-take rose from 16pc of GDP to 27pc and the public debt shrank from 76pc to 58pc.

The fiscal deficit was also brought under control as it mostly fluctuated around 4pc or less before resurging to 7.3pc in 2008. Foreign direct investment (FDI) inflows also spiked to $5.4 billion from a mere $473 million as the investment rate averaged 17.8pc during the 2000s.

The economic numbers for the 2010s compare rather poorly with the data for the preceding decade. The average economic growth rate came down to 4.2pc, investment averaged 15.3pc of GDP and private credit off-take dropped sharply to 17pc. The public debt has hit the roof, rising to 85pc of GDP as the fiscal deficit widened to 8.9pc during the last fiscal year. Barring Chinese investments around the China-Pakistan Economic Corridor (CPEC), overall FDI declined to a few hundred million dollars.

Sajid Amin Javed — an Islamabad-based economist and researcher who does not agree with the view that Pakistan’s economy grows faster under dictatorial regimes — blames government policies that seek to boost growth by fuelling (public and private) consumption, and not by higher efficiency-seeking investments.

“When we pursue a higher growth rate based on consumption, we end up with poor policy trade-offs like maintaining an overvalued currency and accumulating debts to inflate the size of the economy. This is why economic gains achieved are never sustainable. Every time our GDP increases by around 5pc, we hit a new crisis with a balance-of-payments emergency staring us in the face.”

According to the World Bank, the share of investment-to-GDP in Pakistan is one of the lowest at 15pc, almost half of the South Asian average of 30pc, which translates into inadequate infrastructure, lack of access to sufficient levels of energy and water, and poor quality of schools and hospitals.

According to Mr Javed, both military regimes and elected governments have pursued similar growth policies. “Musharraf was nevertheless hugely helped by substantially large capital inflows in the form of aid, grants and loans unlike the civilian governments that succeeded him.

“Foreign investors also made significantly large market-seeking, strategic investments during that period. But at the end of the day, we saw the growth collapse and Musharraf’s policies fall apart (in the wake of the global financial crisis and the massive rise in global oil prices) with the new elected government inheriting a broken economy.”

Optimus Capital Management Executive Chairman Asif Qureshi blames short-term policy horizon of the elected political governments for lower private investment whose share in GDP dropped to less than 10pc in 2019.

“It is unfortunate that the policy horizon of the elected governments is linked with election cycles, which made them pursue an expansionary fiscal policy and undertake mega infrastructure projects that would help them get votes. Both the PPP and the PML-N pursued such policies, ran high fiscal deficits and accumulated debt, which we are paying back today, to fuel growth, crowding out the private sector. The PML-N took its game to a whole new level when it borrowed huge money to build expensive metro bus and train projects and set up power plants in Punjab. Musharraf on the other hand followed fiscal consolidation and encouraged the private sector because only private investment can boost sustainable growth and create jobs.”

Almas Hyder, former president of the Lahore Chamber of Commerce and Industry, largely agrees with Mr Qureshi’s argument. “Investment decisions are not affected by the nature of the government. It is the government’s economic and investment policy framework that encourages or discourages investment. Our policies have always encouraged non-productive investments in real estate and property. Our trade policies have always had a strong anti-industry bias and favoured imports over domestic productivity. Even investments – local or foreign – that have been made in the manufacturing aim at catering to domestic demand rather than increasing exports.”

Published in Dawn, The Business and Finance Weekly, December 30th, 2019