What's in store? economy in 2008

[Neo]

What's in store? economy in 2008 ​

KARACHI (January 25 2008): The year started in Pakistan with dark clouds on the horizon, but no silver lining visible anywhere. On the contrary, every thing points to toil, turmoil and tears, and more of the same till infinity.

This gloomy prospect is not a hypochondria's raving, but a stark reality facing not only Pakistan but much of the rest of the world. Possible exceptions may be China, India and Russia, in that order.

However, the leader (so far) of the so-called 'Free World' and champion of the 'New World Order' and 'Democracy every where', whose currency was the world's prime choice for international transactions ever since the WII - the USA - is now teetering on the brink of disaster. A lame duck administration limping on its way to the EXIT, has indulged in another of its desperate acts of fantasy, by cutting the basic interest rate, but the malaise which this was intended to cure, simply refuses to go away.

Recession is there and emerging quite briskly out of the shadows, to envelop USA economy, and consequently, much of the globe. Pakistan will be one of the most vulnerable nations on this score, even if it has a plethora of problems all its own, to start worrying about the fate of its prime benefactor.

Talking of lame ducks, we do not lag behind in this field either. Elections or not, our problems are not going to be solved in a short time, by any chance. Pakistan is a target of a multi-pronged attack from a hostile world, and there is no difference between (so-called) friends and foes, on this score. Our institutions are facing or have a potential exposure to a host of problems.

SOME OF THESE ARE ENUMERATED BELOW:

A) THE ADMINISTRATION:

i) Budget deficits

ii) Revenue losses

iii) Indiscriminate borrowing - domestic

iv) Foreign aid (donations or loans) sources drying up, or terms becoming too stiff to be acceptable

v) Adverse balance of payments

vi) Dwindling forex reserves

vii) Risk of default on foreign loans at maturity

viii) Inflation - galloping at a ferocious rate

ix) Loss of purchasing power of Pak rupee

x) Mass discontent and violent demonstrations in streets

xi) Expanding terrorist activities

xii) Worsening law and order situation in urban areas

xiii) Loss of tourism income - immediate as well as prospective

xiv) Diversion of development funds to other purposes

xv) Growing hostility of neighbours, and border incidents, with potentialities to blow up into a full-scale war.

xvi) Necessity of devoting even greater amounts to defence, at the cost of civilian sector allocations

xvii) Compounding energy problems

xviii) Fall in production - agricultural and industrial, shrinking the taxation base

xix) Increasing unemployment, poverty incidence and population

xx) Political instability and social unrest

xxi) Brain drain, and so on.

B)THE PRIVATE SECTOR:

i) Bank failures

ii) Insurance companies' vulnerability

iii) Widespread insolvencies

iv) Closures of businesses and industries due to financial and energy crunch

v) Rising prices, and consequent under-nourishment and ill health of people

vi) Rise in illiteracy rate

vii) Mass migrations, and dislocations of family life.

viii) Increased divorces and splitting of settled families due to finance- based psychological problems

ix) Increased mortality rate among children and the elderly

x) Rampant unemployment due to layoffs, failing businesses and general despondency

xi) Housing shortages due to unaffordable rates of rent or cost... and so on.

To find an answer to all these problems is a Herculean task beyond a life-time, then who will take care of these and how? The question rings and rings, but nobody picks up the phone at the other end.

The sum total of all the above, reduced to monetary terms in Pak Rupees runs into a figure with astronomical connotations. Our present and future generations have to pay for it, but where are the opportunities to earn or raise that kind of money?

One final word to sceptics who may not agree with what I say. Just have a look at the esteemed daily 'FINANCIAL TIMES' issue of January 23, 2008 - the section titled 'The World in 2008' and the heading 'ALARM FLAGS LITTER THE GLOBE'.

Business Recorder [Pakistan's First Financial Daily]

 

[mujahideen]

We have many problems before us. But one of our biggest problem is political turmoil. I personally think if our politicians are destroying the country, if these politicians can mature, them we are sure to succeed.

 

[solid snake]

Nobody in Pakistan seems to care about the economy. Everyone only cares about themselves and power so they will continue to cause turmoil and unrest just to push their own agenda. To solve these problems, we need strong democratic institutions. Terrorists are our number 1 threat, and I think it's time to declare all out war on them. The armed forces should conduct operations to the same scale as they would in a war with India. War has been known to stimulate the economy, plus it would get rid of the terrorist threat once and for all.

 

[Energon]

To solve these problems, we need strong democratic institutions. Terrorists are our number 1 threat, and I think it's time to declare all out war on them. The armed forces should conduct operations to the same scale as they would in a war with India. War has been known to stimulate the economy, plus it would get rid of the terrorist threat once and for all.

Economic downturn has always coincided with democratic rule in Pakistan. To assume that democracy is the answer to the current problems would be a bit naive.

One cannot conduct war on/with citizens despite of how unfavorable they are at the moment as they would with an adversarial nation. Also, in the Indo-Pak scenario, despite the advantages of men and material that India has, the PA is still a military force with a similar grade of equipment capable of carrying out traditional warfare. This is not the case with the tribals. It is a complete mismatch and the PA would basically end up slaughtering everyone. The only problem is that not everyone gets slaughtered; they hide, regroup and keep coming back until the nation is totally bled out and can no longer afford to keep up the expensive military machine.

Also, war can only stimulate the economy if it is conducted outside the nation where all the damage and losses are incurred by the enemy or a third party. It is also important that the army is seen as victorious.
I think Kargil is probably one of the rare examples where the battlefield was actually within the borders of the nation and still managed to bring about a stock market surge. Granted all the action took place in the mountains away from major economic hubs and the only real cost was that of human life, which has very little value in India.

However this is not the case for Pakistan. The war is very very expensive and it is being carried out throughout Pakistan where the enemy is in a position to exact damage and retaliatory strikes upon major cities and economic hubs via terrorism and suicide bombings. It is highly unlikely that this conflict will bring about an economic upswing.