Pakistan Journal of Applied Economics

21-46

Authors: S. Akbar ZAIDI*

For nearly two decades. the International Monetary Fund and the World Bank have been implementing stabilization and structural adjustment programmes in underdeveloped countries. These policies have focused principally on attempts to improve balance of payments. cut inflation. reduce the budget deficit. and ensure increased economic growth. Institutional and structural arrangements within the economy are also transformed so that the package can be implemented in the appropriate conditions. The results of the structural adjustment programme are mixed: some countries have shown growth. others have not; for the most part. the budget deficits have not been adequately cut; many programmes have been outright failures with disastrous consequences. There is almost complete agreement that the social welfare and human repercussions of the structural adjustment programme have been all too severe. Pakistan has adhered to a structural adjustment programme since 1981 . The central argument of this paper is that Pakistan's economy is in fairly good shape and does not need an IMF/World Bank sponsored structural adjustment programme. Pakistan does not suffer from the ailments and afflictions which a large number of countries. who have requested and followed structural adjustment programmes. do. The economy has grown markedly in the past. and can continue to show growth. development. and progress. without structural adjustment programmes. However. reforms and better management are needed. The paper concludes with an attempt to understand why our governments and our intellectual elite fail to question and evaluate the agendas set from abroad.

47-75

Authors: Hafiz A. Pasha & M. Asif Iqbal*

Macro economic imbalances in Pakistan, caused by the burgeoning budget deficit and a large trade deficit, have created strong pressures for stabilization and structural adjustment involving wide ranging reforms in different sectors of the economy. Given downward rigidities in public expenditure, resulting from the growth in defence and debt servicing liabilities, it has become essential to reduce the budget deficit primarily by action on the revenue side. Following the largest ever budget deficit in 1990-91, the newly inducted government constituted a Tax Reforms Committee (TRC) to study the problems in the taxation system and to make recommendations for improvement. The Committee submitted its report in early 1991. Most of its proposals were accepted by the government. The Resource Mobilization and Tax Reforms Commission (RMTRC) was constituted to implement the recommendations of the TRC and to contribute directly to the budget making process. Over two years have elapsed since setting up of the RMTRC and three budgets of 1991, 1992 and 1993 respectively have been announced incorporating significant changes in the taxation system. However, taxation reforms remain one of the least publicized areas of reforms as compared, for example, to steps taken towards liberalization, privatization and deregulation of the economy. This paper attempts to identify the major tax reforms that have occurred in recent years and evaluate them from the viewpoint of impact on revenue and the efficiency and equity aspects of taxation .

117-126

Authors: Riaz Riazuddin

The objective of this paper is to evaluate the trade policy of the' caretaker government. This policy proposes a comprehensive tariff reform to be implemented from the fiscal year 1994-95. Main features [Government of Pakistan, (1993)] of this tariff reform package are as follows: 1.Maximum tarifflevels will be set at only 35 or 50 per cent with six slabs of 10,15,25, 35,45 and 50 per cent. Existing tariff rates will apply to motor vehicles, alcoholic beverages, POL, wheat, fertilizers, pesticides and life savings drugs. 2. Tariff reduction will be phased in gradually over a three year period. 3. Many concessions and exemptions present in the existing tariff regime will be withdrawn gradually. 4. Tariff structure will represent a cascading of nominal tariff with progressive stages of manufacturing, Locally produced goods will be subjected to higher tariff rates compared to goods not produced domestically. 5. Tariffs on machinery and equipment will be 10 per cent unless this machinery is produced locally. 6. High priority domestic industries (such as engineering and chemicals) will receive nominal protection of 50 per cent. 7. Raw materials and intennediate goods predominantly used in the production of exports would be subjected to zero rate of duty. 8. Existing import licence fee, iqra surcharge and flood relief surcharge. will be merged with the statutory tariff rates.

117-146

Authors: The Differential Impact Of Power Loadshedding On Industrial Units In Pakistan

The objective of this paper is to highlight the fact that power outages in the industrial sector of Pakistan have not only affected the overall level od output and value added but the impact has also been highly differentiated in character. This has meant that the burden of adjustment to the energy shortages has fallen primarily on small and medium-sized firms. it is likely, therefore, that load shedding will exacerbate the inter-personal distribution of income in the country. As such, policy in the energy sector will, of necessity, also have to incorporate equity considerations.

165-193

Authors: Geoffrey A. Jehle*

This paper presents new results on income distribution in Pakistan from an analysis of the full HIES data tapes for 1984-85, 1985-86, 1986-87, and 1987-88. An explicit social welfare methodology is adopted to measure changes in inequality at the national level, and within and across provinces, over the period. Estimated Lorenz curves for Pakistan and each of its provinces, in each of the four years, are provided, and cardinally significant Atkinson-Kolm-Sen ethical relative indices of inequality are computed. Strong evidence is found that income distribution in Pakistan improved from 1984-85 to 1987-88, and this conclusion is robust to a wide range of distributional values. Judgments on the trend in inequality over time within and across Pakistan's four provinces are shown to depend more heavily on the investigator's choice of distributional values.

27-69

Authors: David Coady

This paper presents an analysis of price (tax) reform in developing countries, with particular reference to Pakistan for 1976. The purpose of the paper is to highlight aspects which need to be taken account of when formulating price policies. The results and conclusions presented should therefore be accepted in this spirit and also seen as preliminary.

83-95

Authors: Nuzhat Ahmad

Upward and downward residential mobility behavior of household between different income level neighborhoods in Karachi is analysed in this research. A multinational logit technique is used to analyse the data of 6275 households in the city. Results of the analysis indicated that mobility between different income level neighborhoods in a developing country is driven by considerations than are different as compared with the developed countries. The analysis shows that upward and downward moves are sensitive to disequilibrium in housing consumption. There is still premium to independence housing as upward mobility is not associated with moves to apartment housing, and downward moves are more sensitive to a declining permanent income relative to current income. Moreover, upward residential mobility is associated more than a move to peaceful areas and downward mobility means moving to worst serviced areas.

135-156

Authors: Ashok Parikh

This paper quantifies the rates of return of different agricultural inputs, and studies whether labour and fertilizers are substitutes complements. The study uses detailed farm level data based on the survey conducted by the International Food Policy Research Institute and Bangladesh Institute of Development Studies, covering sixteen villages in 1981-82. Different definitions of substitutes and complements are used. We find that the use of a price definition for classifying inputs as substitutes and complements is not possible when some of the inputs are not purchased in a market place. On the basis of a quantity definition,(fishers) fertilizer and labour are complements.

167-177

Authors: Ahmad M. A. Ghamdi

Due to lack well-developed financial market and the Islamic prohibition of a predetermined interest rate,one can expect the opportunity cost of holding money in Saudi Arabia and some developing countries to be captured mainly by the inflation rate and some measures of external monetary and financial factors. The demand for money function developed here takes into consideration the effect of such factors. The empirical results of the estimated money equation for Saudi Arabia suggest that an increase in real income tends to increase the demand for money but, high inflation rates tend to lower it. The empirical evidence also indicated that foreign interest rates and exchange rate variation have a effect in the Saudi money demand function.

73-84

Authors: Salim Chishti & M. Aynul Hasan

This study examines the causality and stability of the relationship between variability in inflation and dispersion in relative prices using monthly price data for twenty industrial groups. ARIMA models have been estimated and the adequacy of the filters has been checked with modified Q-statistic before applying the standard causality tests. Also Hannan and Quinn test has been used to identify the lag length. Results indicate a strong but unstable relationship between the two variables. Granger causality is found to be generally bo-directional.