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.