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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)

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Update No: 031 - (26/08/08)

Pakistan a Bleak Prospect 

Musharraf goes
After much hesitation and under the threat of impeachment, president Musharraf resigned in August. The coalition government in Islamabad had decided to get rid of him at the beginning of the month, following an apparent compromise between PPP and PML. The coalition seemed to have agreed that he would not be prosecuted if he resigned, satisfying the PPP’s desire to leave Musharraf a way out. It appeared that a key factor in Musharraf’s decision to resign was the advice received from the top echelons of the army that it was time to leave. However, the government coalition still has not resolved all its internal differences. There is consensus that the Supreme Court judges sacked by Musharraf should be reinstated, but the PPP leadership does not want Chief Justice Chaudhry back in his job as it does not trust him; the PML instead campaigns in his favour. The PML also insists that the powers of the President to sack the Prime Minister should be abolished, while the PPP leader, Zardari, has advanced his candidacy to the job and is not too keen on any dilution of the President’s powers. 

Economic crisis picks up
Pessimism is rapidly expanding among economists, several of whom believe that Pakistan is heading for a major economic crisis. The limitations of an economic growth policy based on the expansion of consumption are now becoming apparent. Inflation has been growing very fast in recent months and has now reached 24%, the highest level ever in Pakistan’s history. The situation has been compounded by the slow reaction of the State bank to the worsening inflation; the bankers seem to have waited for the government’s approval before tightening their monetary policy, despite having the constitutional right to act independently. The government, in turn failed to implement a tight fiscal policy in this year’s budget and the deficit seems set to rise. As confidence in the government and in the economic prospects fade, capital flight is accelerating, a fact reflected in the decline of the currency and in the crisis of the stock exchange.

Troubled relations with Washington
The problems faced by the coalition government are by no means purely economic ones. Relations with Washington are tense, as the Americans no longer exchange information with the Pakistani security services about their cross border operations and openly accuse the ISI of cooperating with the Taliban. Previously, Washington’s privileged relationship with Musharraf represented an incentive to withhold such criticism. Now the Americans demand an extensive reform of the ISI. Such attitude is unlikely to be seen positively in Islamabad, which feels such pressure is unfair at a time of crisis in Pakistan, particularly when the trouble started under Washington’s friend, Musharraf. The difficulties faced by the government are well exemplified by the attempt to place the Inter-Services Intelligence (ISI) and the Intelligence Bureau (IB) under the control of the Interior Ministry: within hours the government had to backtrack on its decision after the Army complained about it. Within the American security establishment, pressure grows for tougher measures against the militants in the FATA and in the NWFP and comparisons with pre-2002 Afghanistan are beginning to become common. In Pakistan, by contrast, collaboration with the Americans is increasingly unpopular and cross border raids are more and more antagonising public opinion, forcing the government to take strong formal stands against them. When Prime Minister Gilani, on a visit to Washington, demanded a nuclear pact similar to the one in the making with India, his statement appeared as a provocation and an attempt to force Washington to state its position vis-à-vis Pakistan as a key ally. In the meanwhile, the situation in the NWFP continues to worsen, with the militants now having moved out of their original strongholds in the FATA and gradually taking over the settled area; even the city of Peshawar appears increasingly in a state of siege.

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