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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: 090 - (26/10/13)

Summary: The main success of the Sharif government so far has been the improvement of relations with Washington, mainly thanks to Islamabad’s role of facilitator in contacts with the Afghan Taliban. On the economic front, where the expectations were greatest, so far Sharif has little to show, apart from successfully signing up to more loans to pay existing debts. But on the political front for now Sharif appears in a very solid position, with none of the rivals able to mount a serious challenge.

Honeymoon with Washington continues
The Sharif government is playing an active role in connecting the Afghan Taliban to Washington. Islamabad has been hosting meetings between US and Taliban representatives and has been putting pressure on the Taliban concerning the need to open formal talks with Washington. Sharif’s government has been able to assert its own role in these talks and in handling the Afghan Taliban vis-à-vis the army. Whether these talks will achieve anything or not is too early to say, but the Pakistanis have been making some significant concessions, including the release of Mullah Baradar, the most senior Taliban detainee, whom they had always refused to release previously. Washington seems set to further reward Islamabad with the release of US$1.6 billion of military and civilian aid. Despite the hostility of public opinion, therefore, Sharif seems to intend to keep moving down the road of détente with Washington.

A justified enthusiasm?
Over the last 12 months the Karachi stock exchange soared 44%, making it one of the best performers in the world, despite its reputation for instability and lack of adequate regulations. What justifies this enthusiasm? Difficult to say, as the economic predicament remains very challenging. The Sharif government promises to reduce the fiscal deficit to 4% from the current 8.2%, as well as to reduce the debt from 63.5% of GDP to 58% without introducing any new taxes. But Pakistan will have to spend 30% of its GDP in 2013-14 to pay back maturing debts, up from 25% in 2012-13; this makes it the financially most exposed amongst developing countries.

Concerning the energy crisis, the main effort of the government is based on price increases, which should reduce consumption and offer incentives to industry to produce more. However, many observers believe that this is not adequate to meet Pakistan’s rising needs, given that energy demand is expected to be rising at the annual rate of 2.2% a year in the future. The country mainly relies on natural gas, but its own internal production is set to start declining soon, not long after 2015 the country will become an importer of natural gas. It is expected that Pakistan’s gas production will fall from 38.4 billion cubic metres (bcm) now to 13 bcm in 2035. For this reason the gas pipeline from Iran, despite stern opposition from Washington and from Saudi Arabia, remains a priority for the Sharif government.

There is some disagreement between the World Bank and IMF in forecasting the Pakistani economy. The World Bank estimates that GDP will grow at 3.5% next year, while the IMF believes growth will not exceed 2.5%. The Asian Development Bank situates itself in between, with a 3% growth forecast. While the IMF and the ADB believe that the austerity requested by the IMF will slow the economy down, the World Bank believes that the strong message that these measures represent will encourage investment. In the meanwhile however foreign reserves are down to just 1.2 months-worth of imports, due to debt repayments.

A Musharraf threat?
With the PPP in disarray and Imran Khan hospitalised, Nawaz Sharif’s political position appears very safe. Could the army find another vehicle to threaten Sharif without having to stage a military coup? Former dictator Musharraf’s return to Pakistan has so far failed to re-launch his political career. The Chaudry brothers, who helped him set up the PML-Q during his years in power, have kept their distance from him, forcing him to form a new political party as his vehicle, towards taking back a role in Pakistan’s politics, the All Pakistan Muslim League (APML). In fact even the PML-Q is now quite marginal in the Pakistani political scene, with just 2 seats in parliament, but it was always a vehicle for Musharraf. He is still under house arrest at his farmhouse and his lawyers are trying to get him freed on bail, but at the age of 70 Musharraf does not have much time for his political comeback.

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