The Paradox of Prosperity: Economic Liberalization, Structural Shift, and Authoritarian Governance in Zia-ul-Haq's Pakistan

• Imran Ali

  Author

The eleven-year tenure of General Muhammad Zia-ul-Haq (1977-1988) represents a crucial and often contradictory phase in Pakistan’s economic evolution. Emerging from a period of excessive state control and nationalization, the regime implemented a comprehensive strategy of economic liberalization, strategically outlined within the ambit of the Fifth (1978-1983) and Sixth (1983-1988) Five-Year Plans. This policy involved a pragmatic shift back toward private sector incentives, cautious deregulation, and the selective, yet persistent, Islamization of the financial framework. The decade’s hallmark was a sustained, high average annual Gross Domestic Product (GDP) growth rate of 6.6 percent, leading to palpable gains in industrial output and a marked reduction in absolute poverty across the country. However, the apparent success of this liberalization was not primarily driven by the internal robustness of the policy reforms themselves, but rather by massive, non-endogenous geopolitical rents. Specifically, the economy was heavily subsidized by a substantial influx of foreign aid tied to Pakistan’s frontline status in the Soviet-Afghan War, alongside unprecedented volumes of remittances from Pakistani workers in the Gulf states. This research contends that while Zia’s policies successfully corrected the destructive imbalances inherited from the preceding administration, the high-growth phase ultimately failed to foster resilient, institutionally grounded development, instead deepening structural dependencies and fiscal vulnerabilities that would plague future democratic governments.

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