Pakistan’s 6.0% p.a. growth rate over the past two decades has been considered by some as a “development puzzle” because this growth performance has been accompanied by three major disconcerting factors-high fiscal and current account deficits, relatively low savings and investment rates, and poor human capital formation. Using a standard statistical growth analysis, the paper shows that, consistent with the predictions of economic theory, the main determinants of growth have been: a rapid pace of physical capital accumulation, the positive contribution of labour force growth, greater competition from external trade, and a policy of economic liberalization since 1978. The growth impact of these traditional factors was augmented by improvements in total factor productivity resulting from greater trade and other economic liberalization that has happened in Pakistan since 1978. The sustainability of this high growth performance over the medium-to-longer term in the future is, however, doubtful. The outlook for the 1990s is that both foreign and domestic real interest rates will remain significantly positive. In this situation, if Pakistan were to continue to run fiscal deficits of the same magnitude as in the past, a financial crisis is likely to emerge pretty rapidly. Using a macroeconomic consistency framework, the paper derives estimates of sustainable current account deficits (i.e., deficits that do not worsen external creditworthingess) in the range of 3% of GDP p.a. Consistent with this and the Government’s inflation target of 5% p.a., the sustainable fiscal deficits are in the range of 4.5-5% of GDP p.a. Given the need to reduce macroeconomic imbalances, the paper also concludes that a substantial adjustment effort will be needed to raise domestic saving and investment in order to ensure the consistency of these macroeconomic targets with the growth target. Lower fiscal deficits will also help reconcile the need for greater financial resource mobilization with the objective of stimulating private investment. Finally, the paper argues that Pakistan’s ability to sustain high growth rates over the longer terms will also depend upon rapid progress with human capital development

This paper develops a simple money multiplier model of the money supply and examines the behaviour of each of the components of the money multiplier for the period 1972 to 1993. Empirical results suggest that although the deposit-currency ratio equation is stable, the equations of the time-deposit ratio and the excess reserves-deposit ratio are unstable. Both the narrow and broad money multiplier equations are also found unstable. The paper concludes with a discussion on the implications of instability in the money multiplier for monetary policy through monetary targeting.

This article attempts to place the UNDP’s Human Development Index in historical as well as analytical perspective by explicating its relationship with notions of  “basic needs”, “opportunities”, and “functioning and capabilities”. It is pointed out that while inevitably limited and incomplete, the index has great value, in particular for showing up the inadequacies of more simple-minded indices like GNP. In discussing the reasons why human development (as defined by the HDI) is a desirable objective, a distinction is drawn between those who stress the productivity-enhancing contributions of such improvements, who are labelled the “human resource developeess”, and those (the “humanitarians”) who stress human development as an end in itself. It is pointed out that while both groups appear to have the same cause at heart, there are important differences in approach and concrete policy recommendations, e.g., the latter will put more emphasis on participation and on general as opposed to (but not exclusive of) vocational education.The article also considers the issue of an index that will capture aspects of human freedom. While such an index is assential, the article argues, it should not be incorporated into the general HDI, but should stand on its own