Pakistan’s “Export or Perish” Challenge – Institutional Dimensions

The paper analyzes the underlying reasons for the country’s recurrent balance of payment crises using the framework of institutional economics and systems theory. It addresses the institutional challenges in expanding exports in the long term. A systems approach shows how the institutions are embedded in belief systems and mental models (social and cultural values and norms). Some mitigating factors that can weaken the balancing feedback loop are discussed. The analysis indicates that the elites and the belief systems encapsulated in culture and social values play a critical role in institutional change. Therefore, strategies to break out of the vicious cycle, balance of payment crisis-IMF bailouts, need to pivot on these two dimensions. There is a need to develop long-term strategies which would incorporate measures to strengthen economic, political, and social institutions.