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Where Pakistan stands
By Shahid Javed Burki
Tuesday, 29 Sep, 2009
The storm appears to have passed but it has left a weakened country.'
IMF urges donors to deliver on Pakistan aid FUNDING DEVELOPMENT
Senate triples US aid to $1.5 billion In describing Pakistans current situation I have sometimes used the metaphor a perfect storm. The storm appears to have passed but it has left a weakened country that continues to face a number of structural problems in a number of areas.
It would be useful to recall what produced the storm in the first place in order to see in which direction the country is headed and how it can be made to achieve the potential that still exists to ensure a better future for its 170 million people.
A year ago the economy was under great strain. Foreign reserves held by the State Bank of Pakistan were declining at an unsustainable rate. There was fear that if help did not arrive in time Islamabad would have to default on some of its foreign obligations thus bringing the country to the point of bankruptcy. The drain on foreign reserves was the result, in part, of the increase in the price of oil.
In July 2008 the closing price per barrel of oil touched $147.27 three times the price a year earlier. Oil has become an important commodity for Pakistan as the countrys dependence on it for generating electricity has increased.
The increase in the price of oil and a sharp reduction in foreign exchange reserves meant that the country was not able to import as much fuel as needed. This led to serious power shortages which, in turn, resulted in loadshedding that lasted for several hours a day during the peak of the summer. The summer of 2008 was warmer than normal adding to public discomfort. It also took a heavy economic toll. According to one estimate, the power crisis cost the economy seven per cent of industrial output and two per cent of the gross domestic product.
The strain on the economy was felt precisely at the time when the process of political transition was going through many difficult motions. The elections held in February 2008 had made clear that the military would have to give up its political control. Under President Pervez Musharraf, the military had made a desperate attempt to keep its grip on the lever of power.
On Nov 3, 2007 the president had introduced a new constitutional order which had given him additional powers. The president felt that he needed that power to discipline the judiciary which, backed by a remarkable movement led by the legal community, had gathered enough strength to try and bring the executive in line.
This movement was launched when President Musharraf dismissed Chief Justice Iftikhar Chaudhry earlier that year. Chaudhry was reinstated by the courts but was out again in November after the emergency.
Emboldened by its earlier success in support of the Chief Justice, the legal community agitated against what it called President Musharrafs second coup. Supported by the civil society, it put enough pressure on the president for him to yield and give up the powers he had assumed. The final blow was delivered by the February 2008 elections.
It took the politicians several months before they were able to get President Musharraf out of his office. It took that long for the reason that the main political parties were not able to reach an agreement on the shape of the political structure they wished to build in the country.
Should Pakistan choose to be a parliamentary democracy with all power resting in the National Assembly or should it be a hybrid system in which power was shared between the president and the parliament? The question remains unanswered.
Unsettled economic and political systems gave space to the forces of Islamic extremism. They were able to expand their reach by the use of force and gained control in several areas in the northwest including Swat and its adjoining districts. It was at that time that the military was authorised by the civilian leadership to start an operation that would rid the area of the militants and later re-establish the writ of the state over the tribal areas. The first part of this mission has been achieved.
The economy is coming out of a deep crisis, helped in part by the International Monetary Fund, the World Bank and the Asian Development Bank. A group of countries that Islamabad calls the Friends of Pakistan met in Tokyo a few months ago and pledged significant amounts of resources. The US is set to provide substantial assistance to the tune of $1.5bn a year which will be sustained for at least five years. Foreign reserves have been rebuilt to the point where the country can comfortably finance its large trade deficit. There is some indication that the level of domestic investment may have also begun to pick up although foreign direct investment has as yet to return.
On the political side, tensions between the two mainstream parties have heated up somewhat but have not yet reached the point at which the stability of the system could be seriously threatened. It appears that the main political leaders are anxious not to do anything that would tempt the military to reassert itself. But as already indicated the most significant development has been on the terrorism front. Where will Pakistan go from here? To answer that question we should look at how the country got into such a troubled state to begin with, a subject that will be focused on in the coming weeks.
By Shahid Javed Burki
Tuesday, 29 Sep, 2009
The storm appears to have passed but it has left a weakened country.'
IMF urges donors to deliver on Pakistan aid FUNDING DEVELOPMENT
Senate triples US aid to $1.5 billion In describing Pakistans current situation I have sometimes used the metaphor a perfect storm. The storm appears to have passed but it has left a weakened country that continues to face a number of structural problems in a number of areas.
It would be useful to recall what produced the storm in the first place in order to see in which direction the country is headed and how it can be made to achieve the potential that still exists to ensure a better future for its 170 million people.
A year ago the economy was under great strain. Foreign reserves held by the State Bank of Pakistan were declining at an unsustainable rate. There was fear that if help did not arrive in time Islamabad would have to default on some of its foreign obligations thus bringing the country to the point of bankruptcy. The drain on foreign reserves was the result, in part, of the increase in the price of oil.
In July 2008 the closing price per barrel of oil touched $147.27 three times the price a year earlier. Oil has become an important commodity for Pakistan as the countrys dependence on it for generating electricity has increased.
The increase in the price of oil and a sharp reduction in foreign exchange reserves meant that the country was not able to import as much fuel as needed. This led to serious power shortages which, in turn, resulted in loadshedding that lasted for several hours a day during the peak of the summer. The summer of 2008 was warmer than normal adding to public discomfort. It also took a heavy economic toll. According to one estimate, the power crisis cost the economy seven per cent of industrial output and two per cent of the gross domestic product.
The strain on the economy was felt precisely at the time when the process of political transition was going through many difficult motions. The elections held in February 2008 had made clear that the military would have to give up its political control. Under President Pervez Musharraf, the military had made a desperate attempt to keep its grip on the lever of power.
On Nov 3, 2007 the president had introduced a new constitutional order which had given him additional powers. The president felt that he needed that power to discipline the judiciary which, backed by a remarkable movement led by the legal community, had gathered enough strength to try and bring the executive in line.
This movement was launched when President Musharraf dismissed Chief Justice Iftikhar Chaudhry earlier that year. Chaudhry was reinstated by the courts but was out again in November after the emergency.
Emboldened by its earlier success in support of the Chief Justice, the legal community agitated against what it called President Musharrafs second coup. Supported by the civil society, it put enough pressure on the president for him to yield and give up the powers he had assumed. The final blow was delivered by the February 2008 elections.
It took the politicians several months before they were able to get President Musharraf out of his office. It took that long for the reason that the main political parties were not able to reach an agreement on the shape of the political structure they wished to build in the country.
Should Pakistan choose to be a parliamentary democracy with all power resting in the National Assembly or should it be a hybrid system in which power was shared between the president and the parliament? The question remains unanswered.
Unsettled economic and political systems gave space to the forces of Islamic extremism. They were able to expand their reach by the use of force and gained control in several areas in the northwest including Swat and its adjoining districts. It was at that time that the military was authorised by the civilian leadership to start an operation that would rid the area of the militants and later re-establish the writ of the state over the tribal areas. The first part of this mission has been achieved.
The economy is coming out of a deep crisis, helped in part by the International Monetary Fund, the World Bank and the Asian Development Bank. A group of countries that Islamabad calls the Friends of Pakistan met in Tokyo a few months ago and pledged significant amounts of resources. The US is set to provide substantial assistance to the tune of $1.5bn a year which will be sustained for at least five years. Foreign reserves have been rebuilt to the point where the country can comfortably finance its large trade deficit. There is some indication that the level of domestic investment may have also begun to pick up although foreign direct investment has as yet to return.
On the political side, tensions between the two mainstream parties have heated up somewhat but have not yet reached the point at which the stability of the system could be seriously threatened. It appears that the main political leaders are anxious not to do anything that would tempt the military to reassert itself. But as already indicated the most significant development has been on the terrorism front. Where will Pakistan go from here? To answer that question we should look at how the country got into such a troubled state to begin with, a subject that will be focused on in the coming weeks.
. It is only by Allah SAW grace that this country has survived thus far and it is my firm belive that it will continue to do so. The quicker we great rid of this so called elite that seem to be above all National Divine and moral laws the better. We dont need PPP PML(A-N-S etc) MQM ANP Jamate Islami to name a few. We need leadership like that of Mr. Jinnah who had the welfare of the people at heart and not this swiss bank accounts.
