Toward a Heterodox Approach: Reconciling Stabilization and Economic Growth in Pakistan

This article attempts to show that a strategy for accelerated growth for Pakistan is both necessary and feasible. Pakistan’s macroeconomic conditions are broadly similar to some of its more rapidly growing neighbors. The country’s macroeconomic imbalances and inflation need to be brought down, but the required adjustment does not entail precipitate action, which could further depress the economy. We develop a “Heterodox Scenario,” which shows that macroeconomic adjustments can be phased in over the next few years and will be easier to make if the economy were to grow more rapidly. For accelerated growth to materialize, as a minimum, determined steps are needed to overcome the energy crisis, sharply raise the investment rate—particularly, private investment—and strengthen Pakistan’s competitiveness in the world market. A national strategy is needed toward that end.