Economy is in tatters and starved of cash

Click to follow
The Independent Online

PAKISTANIS HABITUALLY complain that their economy lies in tatters. And they have good reason. Ever since the economic sanctions imposed after last year's nuclear test, the government of Nawaz Sharif has faced high unemployment and falling foreign investment

PAKISTANIS HABITUALLY complain that their economy lies in tatters. And they have good reason. Ever since the economic sanctions imposed after last year's nuclear test, the government of Nawaz Sharif has faced high unemployment and falling foreign investment

But even the government has had to acknowledge that Pakistan's problems are acute after the case of a young market stall holder, Tariq Mehmood Kokhar, received widespread newspaper coverage in April this year.

Mr Kokhar poured petrolover his clothes and set fire to himself, saying before he died that he wanted to protest at his desperate situation. Subsequent newspaper inquiries revealed that conflicts with powerful local shopkeepers closely linked to the ruling party had forced into bankruptcy.

His case became famous, not because self- immolations are unusual, but because the Pakistani public related to his desperation - a condition now shared by many others.

General Musharraf, the author of the military coup, realises that if the Pakistani army is to continue to enjoy the huge proportion of public expenditure it receives, the government must give high priority to the economy. In a televised national address on the night he was ousted, the Prime Minister, Nawaz Sharif, had said: "The economy is in a state of collapse."

It is no accident that the only measures the generals have taken since the coup are to impose new financial regulations. It is now forbidden for Pakistanis to deal in foreign currency: the priority is to prevent the flight of capital from the country. Even informal money changers have been told that they cannot operate their businesses until 20 October.

The generals know that above all they have to protect Pakistan's meagre foreign reserves, which stand at just over $1bn (£610m). The country is desperately in need of IMF loans. The last instalment of $280m was already delayed before the coup. It now seems certain that the money will not come through until there is some kind of civilian government in Pakistan.

That could push the country into default. The last time Pakistan looked like being unable to repay the interest on its foreign loans, the US State Department stepped in and told the IMF to give Islamabad a rescue package.

Their rationale was that since Pakistan is a nuclear power, the international community could not afford it to experience a full-blown financial crash. Some Pakistanis are hopeful that Washington will feel forced to bale them out again. But if a military government is in place, the US might find it impossible to give the support that Pakistan needs.

Comments