The political economy of reforms: a case study of Pakistan

The wholesale views of the relative success or failure of adjustment policies or its causes are challenged by a number of empirical studies. These studies demonstrate that there is considerable variation in the economic results of adjustment programmes, and this variation is explicable in terms of the context. quality, and sustained application of adjustment policies. This lecture focuses on the political economy aspects of the sustainability of economic reforms by introducing three basic hypotheses, and testing them with the Pakistani evidence. According to these hypotheses, variation in the result of economic policy reforms depends on: (i) a set of initial conditions which precipitate the decision to · undertake adjustment programmes; (ii) the country's sense of "ownership" of the reform process as indicated by the consensus among the social and political organisations and the presence of a technocratic care group in government devoted to reforms; and (iii) the presence of "capacity" in the country in terms of human capital and resilience of institutions.In the case of Pakistan, the main motivation for entering into adjustment programmes has been the short term foreign liquidity infusion by international financial institutions and other donors. The ownership of reforms has been narrow and domestic capacity to implement them has eroded over time. Several lessons for future management of the reforms can be drawn from this analysis.