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Key Economic Data 
 
  2004 2003 2002 Ranking(2004)
GDP
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: 033 - (22/10/08)

Dumped by friends 
Pakistan appeared at serious risk of default as the end of October approached, as its requests for help towards the governments of China, USA and Saudi Arabia were rejected. Although the Chinese promised to intensify their economic cooperation with Pakistan and to build two nuclear power stations, they refused to inject US$1.5 -3 billion into the country’s central bank, as requested by Islamabad, in the absence of structural reforms. They only conceded a US$0.5 billion loan. The Saudis refused to offer discounts on their oil. The government, which needs US$10 billion to meet short term liabilities, is now considering to apply for IMF help, a move which is considered as the last resort as it would imply, if successful, a tightening of its economic policies: removal of subsidies, tighter monetary policy and steps toward reducing the fiscal deficit, all of which are expected. In mid-October the government already announced its intention to completely abolish subsidies on fuel, a move in a direction which must please the IMF. The World Bank and some donor countries will cover part of the bill too.

Default on the horizon? 
The economic situation gets rapidly worse, with electricity one hour on and one hour off. The central bank has foreign currency reserves for just two months of imports, after they have fallen by 75% in a year. The failure to secure Chinese aid led to a further drop in the value of the rupee, which has now lost almost a third of its value, making vital imports even more expensive. The economic crisis in America is also likely to affect Pakistan negatively, as remittances (forecast initially at US$7 billion) are expected to fall this year. Both Standard & Poor's, and Moody have been rapidly downgrading Pakistan’s rating, which is now one of the lowest in the world, and hint that they are considering downgrading again. The balance of payments deficit, worsened markedly in the last quarter (to end September), from US$2.3 billion to US$3.95 billion. The current-account deficit is now at US$14 billion. Capital flight reached US$1.2 billion a month over the last few months. Foreign investment in Pakistani shares has already more than halved and is expected to dive further. The banking system is in deep crisis, with liquidity drying up despite the injection of cash by the central bank. The country’s indebtedness is rising twice as fast as one year ago. Economic forecast are constantly being revised downwards: the IMF estimates now a 5.4% GDP growth this year and 3.5% next year. The allocation of resources to the deprived classes, a key feature of the government’s programme, is already being curtailed, while the focus is now on rescuing the banking sector and offering bank ‘holidays’ to foreign investors. The government is now re-launching the privatisation programme, in the hope of raising some cash. The Pakistani government seems to be counting on the support of Western and conservative Gulf states to help preventing its economic collapse, but the crisis has arrived at the wrong time. Pakistan’s allies will meet in November to see what they can do, but cash suddenly is short these days, particularly in the West. 

The Nawaz-Saudi axis 
The Saudi, among others, are certainly worried by what is happening in Pakistan. Their sponsorship of talks between representatives of the Taliban and of the Afghan government in September in Mecca was clearly more motivated by concerns for the South Asian country, than for its Central Asian neighbour. That Nawaz Sharif attended those talks might also be a hint of Saudi Arabia’s view of a stabilisation plan for Pakistan. Nawaz might in their eyes be a better candidate for a negotiated settlement with the Taliban and is unquestionably closer to the Saudis than the PPP. In the parliament, Nawaz’s PML is already arguing in favour of talks with the Pakistani militants. Zardari’s aggressive approach towards the militants, adopted recently under American pressure, is losing support even within the government coalition, as the Jamiat-Ulama-I-Islam denounces the alliance with Washington. 

Prospects are bleak, not least for the incoming US administration! This a nuclear armed state. Can it also be allowed to become a failed state?

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