Pakistan –– failing anarchy

S R Kasbekar

Pakistan, on the brink of Talibanisation, is battling hard on the domestic front to save its tattered economy from total annihilation. Poor management of the economy together with all-pervading corruption are at the root of all its economic ills. Long years of avoidable conflict with India — that compelled wasteful expenditure — has left little for education, infrastructure development and social programmes. The other major expenditure is on servicing foreign debt of $37 bn. The ongoing Afghan crisis has only added to Pakistan’s woes. Religious fundamentalism, ethnic conflict, and the interminable Kashmir imbroglio have cost it dear in terms of a sagging economy and an unstable civic society. Clearly, if India is a functioning anarchy (as a wag put it), Pakistan is a failing anarchy.

Facts and figures reinforce this failure. Half its populace cannot read or write and 42 million out of its 130 million people earn less than a dollar a day. Neither foreign investors nor local businessmen set much store by investing in the economy. GDP growth has slipped from 5.6 per cent in 1990 to 2.6 per cent in 2000. During the same decade, poverty has gone up from 23 per cent to 30 per cent; the budget deficit has worsened from 5.5 per cent to 5.9 per cent; exports have risen from $5.5 bn to $8.6 bn and imports from $7.4 bn to $10.9 bn. Public debt as a percentage of GDP has declined from 79 to 56.7. Inflation has more than halved from 9.1 per cent to 4.4 per cent. All these parameters point toward a stagnant economy.

Indeed, economic reforms are ongoing: privatisation of state-run industries, pruning of public payrolls and a partial phaseout of costly energy subsidies. Other measures include clamping of a 15-22 per cent general sales tax that has boosted revenue. President Pervez Musharraf has also exacted a ‘support price’ from the United States. Sanctions imposed in the wake of the 1998 nuclear tests have been lifted; it’s been agreed to reschedule government-to-government debt of $ 379 mn. Pakistan may get more at the Paris Club meeting later this year. It’s also slated to receive $131 mn by way of the fourth and final tranche of a ten-month International Monetary Fund programme as a reward for its reforms. The World Bank and IMF could also extend billions of dollars worth of additional aid and loans.
Yet, how much of this money finds its way into productive investment and not into the pockets of predatory generals and politicians is the crucial question. Corruption remains an intractable ill, and unless it’s rooted out the Pakistani economy is unlikely to hold on for long despite Western aid. The priority has to be restoration of business confidence.