PAKISTAN: POLITICAL ECONOMY AND POST-2000 DEVELOPMENTS----9

and, to some extent, relief from the prevarications and greed of opportunistic

civilian politicians, created a salubrious environment for investment. This would

be the more positive interpretation of capital flows into Pakistan, except that

these flows came largely in individual remittances, rather than as substantive

doses of corporate or business investment.” (Ali, 2007)

According to the Pakistan government statistics, the growth rate of the economy reached above

5% in 2003, and stayed above 6% in the mid-2000s. The agricultural growth rate, which is

important enough to affect overall GDP, also remained positive, with no major reverses since

the end of the drought around 2002. Increasing domestic demand for food crops, from wheat to

vegetables and fruits, as well as smuggling of food items to Afghanistan, India and Iran, helped

to maintain the buoyancy of the agricultural sector. At times seasonal shortages of certain

commodities, such as onions, tomatoes and even potatoes, sent their price spiraling, in some

cases necessitating imports from India. These price hikes affected inflation rates and cut into

the already meager disposable incomes of the great majority, thereby even threatening political

stability. Nevertheless, with a cultivated area of over twenty million hectares and other

impressive indicators, such as a livestock herd roughly equivalent in size to that of the US and

the EU, Pakistan’s agribusiness potential remained one of its key resources.

A constraining feature on the maintenance of higher growth rates could be impending shortages

in energy and irrigation water. Under the Musharraf regime there have been no major

increments in energy production, since contracts were reached with independent power

producers in the 1990s for higher cost thermal power generation based on gas and furnace oil.

The inability to construct further hydro-electric projects, and especially the ongoing

postponement of the Kalabagh Dam on the Indus, has threatened to lead to future energy

shortfalls. Robust economic growth has increased energy demand levels, without

commensurate supply enhancements, and with the government caught without an energy

strategy. With local gas reserves due to run out in the next decade, Pakistan has yet to take

decisive measures to develop renewable or alternative energy sources. Pakistan has the

world’s sixth largest coal reserves, but it is of high phosphoric content, and its mining will have

environmental repercussions. The nuclear power generates not more than 1% of Pakistan’s

energy needs. The energy shortfall will not only incur popular wrath, and a chaotic situation

have already took place in some cities, but it will also constrain industrial growth and agricultural

operations in future.