Economics or Politics? I firmly believe in Economics to guide Pakistan’s future. Where are the people shouting on the street on Pakistan’s “mistakes” in Foreign Policy? Where are those “Failed State” propogandists, who were counting on Pakistan’s collapse after the Post '98 nuclear sanctions? We’ve proven them wrong by putting our macroeconomic viability at the forefront. Just remember that an economically powerful Pakistan will truly be force to be reckoned with in the future. The battlefield of this century will be rooted in economic, I just hope more Pakistanis see the reality.
Source: http://www.economist.com/world/asia/displayStory.cfm?
story_id=1650327
Asia: War hero; Pakistan’s economy
The Economist; London; Mar 22, 2003;
Fine macroeconomic framework. Shame about the geopolitics
AS A front-line state in America’s war in Afghanistan, Pakistan has reaped plentiful economic benefits. On March 19th, a report from the International Monetary Fund gave the government top marks for meeting the Fund’s performance criteria, and reconfirmed the positive macroeconomic outlook. But clouds from the Gulf are already casting shadows. Having thrived in one war, Pakistan’s economy may be a casualty of the next.
Pakistani officials and the Fund are at pains to stress that its relatively sound economy cannot be put down entirely to the war on terror. The government installed after the coup staged by General Pervez Musharraf in 1999 had already embarked on a programme of structural adjustment. It has trimmed the bloated civil service, cut subsidies on energy prices, cleaned up the balance sheets of nationalised banks, raised tax revenues and accelerated a privatisation process.
The war, however, surely helped. American gratitude for Pakistan’s assistance brought a grant of $600m. A big boost in itself, that also smoothed negotiations with other foreign creditors, who accorded a generous debt rescheduling. It helped swell the size of the IMF’s own $1.4 billion facility, signed in December 2001. Meanwhile, expatriate Pakistanis, nervous that their businesses might no longer be safe in the West, started sending money home. As a result, Pakistan’s traditional capital flight reversed itself.
That, combined with a surge in remittances from overseas workers, healthy export growth and an increase in foreign investment and aid, has brought a **steady currency, a current-account surplus, and foreign-exchange reserves of $10 billion, more than double their level in 2001. Inflation is subdued, and after the best rainfall for four years the economy is expected to have grown by 4.5% in the current financial year (ending in June), a creditable achievement in a weak global economy. **
Nobody, however, pretends that growth is fast enough, or that the government’s economic reforms are more than half-done. Many Pakistanis, for example, would still no more think of paying for electricity than they would of metering sunlight. The power utilities are a huge drain on the public purse.
Privatising them, and other government businesses, however, is hard, as is attracting other investment. The biggest obstacle remains political instability. General Musharraf’s attempt to give his regime a civilian gloss by handing over to an elected government has resulted in a constitutional quagmire. Add to this persistent violence, including occasional attacks on foreigners, and a continued stand-off with India, a fellow nuclear power, and it is hard to describe the investment climate in Pakistan as hospitable.
War in the Gulf will make it even more hostile. Pakistan’s government has managed to steer a careful diplomatic course. In contrast to its support for the attack on Afghanistan’s Taliban regime, it has refused to endorse the Iraq war, though without antagonising America. Pakistani diplomats last week could scarcely conceal their relief that they never had to vote on a final UN resolution on Iraq.
This time, the government is not in direct conflict with the views of Pakistan’s extreme Islamist parties. So, as they take to the streets to condemn the war, and scream their support for Saddam Hussein and Osama bin Laden, their anger will be directed less at their own government than at the West in general and America in particular. Even so, that is hardly very good for foreign investment.