Aug 18 - 24, 2008

Pakistan these days is passing through one of the worst political and economic cries. Fluid political conditions prevailing since early this year has further shaken the already weak economy. The nation celebrated the 61st Independence Day in a highly charged political atmosphere which is being rightly compared by many with 1971 condition.

Pakistan's economy has miserably failed to sustain the pace of a growth projectile of last half a decade or so due to prevalent series of crises ranging from judicial upsets and constitutional controversies surrounding the Presidency. With the ruling coalition up for an impeachment move against President Musharraf, the sentiment of investment and economic growth has been deteriorating day by day. As the pundits had already warned against the negative impact of the confrontational politics, the latest spell of uncertainty has caused the emergence of all symptoms of a full-fledged economic crisis.

To start with, the economy started taking heat of the judicial crisis at the beginning of the 2007 while the killing of former premier Benazir Bhutto towards the end of the same year appeared to be turning point for the economic growth and strength. Consequently, the postponement of general elections from January 8 to February 18 though only for 40 days also dampened the sentiment of the economic growth. Law and order disturbances during the last caretaker government compelled the local and the foreign investors to keep their fresh business decisions on hold and stay on an approach of wait and see.

This time around the inflationary pressures as a result of the consumer economy based growth of last five years or so also started mounting up squeezing the purchasing power of the commoners. Depletion in foreign currency reserves impelled central bank to suck US dollars in the wake of the rupee's weakening against the greenback. Interestingly, when the dollar was sliding against all other currencies across the globe, the rupee was still getting weaker against the dollar resultantly plummeting against the potent world currencies like the euro and the pound sterling. To a bad luck of the Pakistan's economy, the international crude oil rate also started rising abnormally that by now eased down after touching the unprecedented peak of $147 a barrel. Hike in international oil prices and parallel weakening of Pakistani currency suddenly evaporated the government's fiscal capacity to fund additional development funds. Moreover, the adjustment of the previously pilled up cost of petroleum prices capping by the last government became a task to reckon with for the new government.

Although the government has fixed low targets for the economic growth and big target for the fiscal deficit for the current financial year but in view of the prevailing conditions achievement of these targets appears highly impossible.

The economy was already on the slippery slope and, the latest political announcement of the impeachment of the President considered as business friendly head of state would further accelerate the plunge of the national economy. These are the considered views of some financial analysts, who were interpreting the decision of the ruling coalition against Pervez Musharraf as a grim warning to the business community, which was desperately pleading the rulers to initiate measures that would arrest the decline of the economy and rehabilitate it to some extent. They said that the stock market, which mirrors the state of the economy, was badly mauled by the poor state of financial health and steps taken by the State Bank of Pakistan to raise the discount rate by 100 basis points. Though the Central Bank move was necessary and needed to control the inflationary trend in the country but businessmen had taken this bitter pill with a number of reservations.

They had no choice but to accept the SBP decisions. Initially they felt that the move would help economy in a short term but they painted a bleak scenario for the economy in the long term. The uncertainty hovering over the economic scene in the country was so grim that despite giving assurances to the stock market for launching a bailing package of Rs50 billion the government's promise remained unfulfilled further aggravating the conditions in the stock floor. It has further compounded after the coalition partners decided to bring an impeachment proceedings against President Pervez Musharraf who had been meeting businessmen for the last one month to assure them that he would do every thing to persuade the government to take steps that would help the business community and the industrialists. However, after the latest constitutional move, the President would be more worried about his own bailout than thinking of bailing out the economy.

Some economic experts claimed that the forex reserves of the country has plummeted to $6.9 billion whereas Pakistan's overall monthly import bill totaled $3.5 billion. Further, Pakistan has made a forward payment commitment of $2 billion. The figures further showed that foreign loans had jumped up by Rs500 billion because of devaluation of rupee. If dollar becomes costlier by one rupee, these loans go up by Rs45 billion. They fear that the dollar may touch 90 rupees if the present economic condition persists on.

Owing to the prevailing uncertainty, the share market witnessed outflow of huge funds to other profitable areas, mainly gold and US dollars, as investors were nearly mad in search of safe havens worried over the creeping decline amid falling demand. With our economy alarming 'rescue call', investors are not ready to purchase shares which are creating uncertainty in the stock market. The business community and industrialists feel that the latest political move has given a further sharpness to the already existing uncertainty both in economy and politics. The move may have solved political problems of two political allies and maybe of the judiciary but it will further sink the struggling economy deeper into vicious mess. The community was expecting some soothing measures but unfortunately government has reopened the economic wounds, which may fester if the coalition partners fail to bring peace on the political plank and take steps that will immediately provide quick relief to the poor.

Expressing concern over the prevailing political and economic conditions in the country, some leading industrialist termed the situation never seen before and said that there was a total mess. For the last one year the economic was already limping but now the announcement made by the coalition government to impeach the President compounded the situation setting in motion the rumours factories churning out grim prospects. They said that due to energy crisis, power load shedding, increase in prices of petroleum products and hike in gas tariff had already made the situation worse but the political uncertainty further added fuel to the already volatile situation. They said that prices of petrol had been increased by five times after February 18 elections, which recorded rise of over 30 percent.

The cost of production because of long hours of non-activity due to power shortages is multiplying and at the same time they have to pay to labours who sit idly for hours together doing nothing and just passing their time in factory premises without dong any thing. These worried industrialists are also suffering because they are unable to fulfill their export promises made to foreign clients.

There is no doubt that because of pro-rich and anti poor policies unrolled by kindred spirit Musharraf/Shaukat during the last 7/8 years of their aristocratic rule has made them most disliked persons amongst the masses who vented angers out during last February elections. The common man is keen on getting some relief from rising food prices than impeachment of the president. The coalition government which was voted to power failed to fulfill the pledges made during the last 4 months. The impeachment process initiated last week has certainly helped the government to mellow down the differences between coalition partners on various issues but certainly it is not going to offer some economic relief which masses badly need.

GOING by what responsible members of the grand coalition have been telling us, President Pervez Musharraf's impeachment could be followed by his trial on a wide variety of charges, including financial corruption, murder and sedition. Ayub, who along with Mirza abrogated the 1956 constitution, got away without being subjected to accountability because he resigned after the popular revolt. Yahya's rule fell prey to the 1971 war and Bhutto to judicial murder. Ziaul Haq died in an air crash, and then followed a charade in which Benazir Bhutto on the one side and the Sharifs and their allies in the military on the other made a mockery of the rudimentary concepts of justice. The accountability process launched by the military government after the Oct 1999 takeover also lacked honesty, for it was used as an instrument of persecuting selectively those not on the ruling plank. We know now how some leading politicians; including Aftab Sherpao, Rao Sikander and Faisal Saleh Hayat were forgiven because they had broken ranks with their party. The issue now assumes importance because if Musharraf is tried he will be the first president-general to stand in the dock.

Leading PPP and PML-N members making statements constitute downright propaganda rather than a serious attempt at accountability. In an interview with a British newspaper, Asif Ali Zardari accused the president of siphoning millions of dollars of American aid, while other leaders have come out with grave charges in a manner that appears they have already held Musharraf guilty. It is ironical that the author of the NRO is now being targeted by the beneficiaries of the infamous law. Not only did the NRO enable politicians of all hues to cleanse their often dirty hands within the country, it also facilitated the 'whitening' of millions of dollars stashed away in foreign banks. Would anyone blame the people for being ignorant about the credentials of those who lead them whether in civvies or in khaki?

In case Musharraf goes to trial and the trial is fair many from the present ruling class heralding his impeachment and trial will also stand exposed that shall open another Pandora Box. Musharraf should not be unmindful of the political reality that the people rejected vehemently his party in the last election. Surely dispassionate introspection would lead him to the conclusion that it is time to leave.