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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: 056 - (26/09/10)

Carried by the floods
The political damage caused by the floods continues to hit the Pakistani government hard, as more and more evidence of the callous behaviour of government officials emerges. Although the opposition is trying to capitalise on this, in reality for once Zardari and his colleagues are not really guiltier than the rest of the Pakistani politicians. The problem is the Pakistani state and the way it is organised. An additional problem is the lack of faith in the Pakistani government not only among the Pakistanis, but also among foreign donors, who have been less than solicitous in sending help to Pakistan. They believe that the Pakistani state will not be able to deliver help effectively in any case. Probably, the response of the western public has also been muted by recent revelations of the Pakistani role in organising the insurgency inside Afghanistan and therefore killing NATO soldiers.

With 14% of the cultivated surface lost to the floods, it will take time for Pakistan to recover. The government estimates the loss at US$15 billion. Pakistan was already going to face around 2015/16 a wave of debts rescheduled after 9/11 as a reward for its collaboration, which would bring its total debt from the current US$55 billion to US$73 billion. On top of that Pakistan is already making more debts to face the crisis and will have to make even more soon. At least the IMF has now been forced to concede Pakistan better conditions on the repayment of its US$11 billion loan; Pakistan has been given a choice of either restructuring the debt or going for a new programme, with revised performance criteria which take into account the country’s new conditions. The Pakistani army is the main political beneficiary of the floods: its effective intervention and the readiness of the rank-and-file to sacrifice their leave and rations to help the country have restored the credibility that it had lost in the last phase of the Musharraf regime. The army never neglects to highlight the weaknesses of the politicians, but nobody expects the army to take over now and assume responsibility for so many problems. Islamic charities and foreign donors such as Saudi Arabia have also gained the esteem of the public for their support and quick action.

Time for reform finally?
The floods disaster in also leading to increased pressure on Pakistan to implement reforms which it has always been reluctant to carry out, first and foremost changing the tax system. American officials have warned the Pakistani government that external aid will likely only account for a fourth of what Pakistan needs to rebuild after the floods and that the rest will have to be collected through an improved tax system. At present, just 2% of Pakistanis pay tax. Will the Pakistani elite listen and comply? Few believe it. As usual, it is more likely that the elite will sing the same old song to Washington: if you do not help us, it will all crumble and the extremists will benefit. Indeed the Pakistani government has already stated arguing that there is a serious risk of the Taliban exploiting this mess to gather support. Even when Pakistani politicians talk of raising new taxes in the wake of the floods, they mention a sales tax and a flood surcharge, but no land tax yet.

In the meanwhile bad management is taking Pakistan deeper into its already serious energy crisis: the Pakistan State Oil company is close to bankruptcy and might have to suspend imports of oil, with dramatic repercussions on energy production, at a time when Pakistan is already suffering from a shortage of oil products. In this context, the news that Musharraf, the former commander-in-chief, president-dictator, had decided to re-enter politics and wants to form his own party from his British exile, has not yet had much of an impact. 

 

 

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