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Key Economic Data 
  2004 2003 2002 Ranking(2004)
Millions of US $ 96,100 82,300 73,300 44
GNI per capita
 US $ 600 520 480 160
Ranking is given out of 208 nations - (data from the World Bank)

Books on Pakistan

Update No: 084 - (26/03/13)

Summary: Amid generally negative expectations concerning the chances of a PPP-led government to merge from the forthcoming elections, some pundits observe that Zardari and his friends might do better than expected. But would any sane individual want to be in government the coming summer? A big financial storm is gathering over Pakistan, which any government will find difficult to tackle.

Is the PPP really doomed?
For the first time a Pakistani civilian government has been able to complete its mandate. This piece of good news does not change the fact that the PPP-led government is quite unpopular. President Zardari is rated at 14% in the popularity polls and some elections polls place the main opposition party, the PML-N at 37%, with the PPP at just 16%, the same level of the emergent PTI of former cricket star Khan. Some observers however note that the PPP has been doing much better than expected in by elections in recent months and that the level of actual support might well be significantly higher. In fact the IRI polls place the PPP at almost 29%, ahead of the PML-N at 25% and of the PTI at 20%. Although the PPP would then lose some seats, it might still be able to form a new government thanks to the help of some key allies, such as the mainly Karachi-based MQM. Particularly in the rural areas the PPP may retain much support thanks to some programmes to help the rural poor, which have been implemented in the past 5 years. The rise of the PTI is agreed upon by all observers, but it is not clear how that will translate in seats because of the first past-the post electoral system. While president Zardari is often reviled, he has at least demonstrated to possess considerable political negotiating skills, constantly renovating the coalition which was keeping the PPP in power despite never ending challenges.

The gathering storm
Foreign direct investment continues to decline, down 9.7% during the first 8 months of the fiscal year. That makes minus 85% over 2008. External commentators say that Pakistan is reaching a critical balance of payments situation and that a new International Monetary Fund rescue package might be necessary after the elections. It makes little relief that the Karachi stock exchange is doing well, up 33% since 2008, because the Karachi exchange is tiny and not very representative of the economy as a whole. Foreign currency reserves are down to US$8.1 billion, the equivalent of about two months’ worth of imports and there are US$2.7 billion worth of debt repayments scheduled between now and end June. So far this year foreign exchange reserves have been eroding at the rate of about US$500 million a month. The risk is that of a crisis of confidence and a run on the Pakistani rupee. In this context it is easy to understand why, despite clear indications of the country shifting closer and closer to China in its long term economic planning, in the short term Islamabad has to warm up to Washington in order to secure new loans. Efforts to expand Pakistan’s tax base are not achieving much in part because more and more of the economy is going under cover. The informal share of the economy seems to be growing, with even relatively large companies disconnecting from the state. New estimates place the size of the informal economy at 74% to 91% of the formal economy.

Criticism of the government for its handling of the power crisis is mounting. A bipartisan report highlighted how the minister of water and power did not even attend any of the meetings of the committee dealing with energy shortages. The subsidies system discourages power generation and the government has also been unable to bill all consumers, or to get them to pay their bills. The room of manoeuvre for finding additional resources to invest in power generation is limited, as long as 3% of GDP is pent on the armed forces (in a country where the state collects less than 10% in tax revenue).

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