Indeed President Musharraf is our greatest asset, a fact recognised by the great and good around the world. Inshallah, his historic reforms will continue for many, many years, and we will never go back to the bankruptcy of the past.
http://www.forbes.com/markets/newswire/2004/03/31/rtr1318103.html
Why Pakistan’s markets depend on Musharraf
In three years, Pakistan President Pervez Musharraf has breathed life into one of Asia’s sickest economies. Stock prices are at record highs. Western aid is pouring in and the country has shed its pariah status. But Musharraf’s pragmatic leadership may also be Pakistan’s biggest political risk, following two attempts on his life in December by al Qaeda-linked Islamic militants over his strengthening ties with Washington, analysts say. If something happens to Musharraf, while government officials say there would be a smooth transition, big business, analysts and the man in the teeming streets of the business city of Karachi say political and economic progress could roll back. Most vulnerable is the success story of the Karachi Stock Exchange’s key index, which has risen five-fold since Musharraf joined the U.S.-led war on terror after the September 11, 2001, attacks on Washington and New York. “Much depends on Musharraf and in that sense he also becomes the biggest economic and financial risk,” said Arshad Arif, head of research at Merrill Lynch affiliate KASB Securities.
**The benchmark KSE 100-share index hit a record high of 5,153.85 points on Monday, its market capitalisation topping $23 billion, the exchange said. In September 2001 the index languished at 1,100. Foreign investors’ exposure to Pakistan stocks is negligible, but they were big buyers of a $500 million sovereign bond issue last month, its first since sanctions in 1998, at a tight spread of 370 basis points over U.S. Treasuries. Musharraf’s pragmatism on foreign policy and national security issues has helped lift Pakistan from near-pariah status to key ally of the United States while boosting Western aid and foreign currency remittances from Pakistanis abroad. **
BACK FROM OBLIVION
Pakistan was pushed to near bankruptcy when international funding lines were snapped in 1998 after it matched India’s nuclear weapons tests. A bloodless military coup that sprung Musharraf to power in 1999 also provoked Western indignation. But now Pakistan sits atop a record $12.65 billion in foreign exchange reserves. Economic growth in the fiscal year to June is likely to beat government estimates, galloping along at a rate of 5.5 percent to 5.8 percent according to the central bank. Relations with India, with whom Pakistan fought a bloody border conflict in 1999, are on the mend. But after the attempts on Musharraf’s life in December, top government officials concede the president remains a target of Islamic militants bent on removing a man they see as a traitor to Islam for joining the U.S.-led war on terror.
Stock brokers shudder at the thought.
“The market can go up by another 10 percent in a few months. But if Musharraf goes, all the gains of the last three years can be wiped out in a matter of a few days,” said Shuja Rizvi, head of sales at Capital One Securities. Economic growth has been funded by easy credit, a result of lower borrowing by the government that shaved interest rates on bank loans to as low as six percent from a high of 18 percent just three years ago. KASB’s Arif said continuation of Musharraf and his economic team, led by the Finance Minister Shaukat Aziz, was vital for maintaining the momentum on the political and economic fronts.
CONSENSUS IN MILITARY
Many foreign businessmen and Western diplomats fear Pakistan could lapse into chaos and instability if Musharraf died without a clear system for succession, but top government officials rule out a drastic change if militants achieve their target. “I cannot downplay the negative impact such an event can have, but the fact is that nothing will change on the policy front,” said a senior finance ministry official. “People who think current policies are dependent on an individual have no knowledge of how the power circles in Islamabad work,” he said. Nasim Zehra, an independent political analyst in Islamabad, said Musharraf’s policies had broad support in the military establishment that has ruled Pakistan for more than half of its existence since independence in 1947. “It seems a lot depends on the individual. But if he goes, I don’t see things collapsing. The architects of the current system will be able to work it out,” she said. Analysts say political forces opposed to Musharraf’s policies, mainly Islamic parties which also disagree with his attempts to clear Islamic militants from border areas, do not have enough popular support to challenge the military. Kaiser Bengali, an economist who heads the independent Social Policy Development Centre in Karachi, said Musharraf would have already worked out a contingency plan. “If he goes, another army general will replace him,” he said. Many analysts insist Pakistan’s economic recovery, which is expected to boost GDP 5.3 percent in the current fiscal year, is in its early stages and needs a stable environment to withstand shocks. “There is already a change of perception and attitudes among investors,” said ABN Amro Bank chief economist, Sakib Sherani. “If the current economic and political scenario stays for another year or two the risk perception will itself start to ease.”