Pakistan’s economy facing tough time
Wednesday, January 16, 2008
By our correspondent
KARACHI: After performing reasonably well in initial months of FY08, Pakistan’s economy is currently in the midst of a difficult time. Mounting inflation, a yawning trade deficit and uncertain political environment pose some serious challenges to the overall macroeconomic stability. “In addition, weak agriculture performance during 1HFY08 has resulted in a twin impact of rising inflation and downward pressure on real GDP growth.
The growing shortage of staple foods mainly wheat, rice and pulses have recently triggered tremendous inflationary pressure on the food side, as testified by latest CPI and SPI numbers, leading us to believe that CPI target would again be missed in FY08 by a wide margin,” said Farhan Rizvi analyst at JS Global Capital.
According to latest figures for Dec 07, CPI posted a year to year increase of 8.8 per cent with year to date inflation for FY08 of 8.0 per cent. Spiraling inflation has been a black spot on the strong economic performance over the last few years.
In FY07, for instance, CPI turned out to be 7.80 per cent, far above the government target of 6.50 per cent. In similar vein, inflation has surged once again in 1HFY08 with food inflation in particular posting double digit growth since Oct 07.
The analyst said as a result, CPI was recorded at 9.3 per cent year to year in Oct 07, its highest level for 29 months. Though there was some respite in the remaining months of 1HFY08, with CPI subsiding below 9 per cent in Nov and Dec 07 as food inflation declined marginally.
However, the recent spike in prices of essential food commodities mainly wheat, edible oil, rice etc is likely to enthuse additional inflationary pressure in 2HFY08. He said it is believed that inflationary pressures to persist in 2HFY08. Analyzing the SPI numbers for the week ending January 3, 2008, it is clearly evident that surge in wheat prices in late Dec 07 and moving into Jan 08 has resulted in steep rise in SPI which was recorded at 1.5 per cent, its highest level in nearly 39 months.
With no major respite in food prices thus far, CPI is likely to remain very high in Jan 08. In any case, inflation for the month of January should remain significantly higher than that for Dec 07, as a month to month decline of 0.88 per cent was witnessed in CPI for Jan 07 which would have a compounding base effect on the CPI calculation for Jan 08, he stated. Rizvi said this is very alarming, given the fact that the impact of rising international oil prices is still to be felt. Hence, it is believed inflationary pressure will continue, keeping CPI on the higher side in 2HFY08 as well. Poor agriculture performance could lower GDP growth.
A major culprit in the recent price spike has been the poor agriculture performance, which has resulted in severe shortage of key commodities such as wheat flour, rice and cotton. While, the element of wheat smuggling to Afghanistan cannot be ignored, it is still important to understand that smuggling of a few million tonnes cannot result in the kind of price spike witnessed in last few weeks.
With cotton production expected to depict a decline of 11 per cent in FY08, coupled with a wheat crop projected to post a stagnant to negative growth, real GDP growth for FY08 could end up much lower than the government target of 7.2 per cent.
In the light of the new cotton estimate of 11.6 million bales, he said: “We have revised downward our full year FY08 GDP forecast to 6.6 per cent.” This forecast could decline even further, if there are any major shocks in store on the wheat production in the coming months.
He said trade deficit jumps to $8.2 billion in Dec 07. In addition to the inflationary spiral, widening trade deficit also remains a point of concern for the economy.
According to the latest trade release (Dec 07) from Federal Bureau of Statistics (FBS), trade deficit for 1HFY08 has surged to $8.2 billion as against $6.5 billion in the corresponding period last year an increase of 26 per cent year to year. Driven by rising petroleum and agriculture & chemical import bill, imports have surged by 13 per cent to $17 billion in 1HFY08 compared with $14.9 billion in IHFY07.
In contrast, exports have shown a modest year to year growth of only 4 per cent in 1HFY08. While trade deficit has jumped to $8.2 billion, there has been some respite in deficit growth in Dec 07. Trade deficit has declined by a massive 60 per cent to $1 billion, as against $1.6 billion in Nov 07. He said: “This slowdown though, we believe is extremely short-lived, driven mainly by port inactivity in the aftermath of the assassination of Benazir Bhutto".
http://www.thenews.com.pk/daily_detail.asp?id=91306
Full Version: Pakistan’s Economy Facing Tough Time
Economy worries Pakistanis
Wednesday, January 16, 2008
By Paul Wiseman and Zafar M Sheikh
KARACHI: Idrees Khan feels sorry for his customers when he totals their bills at his general store in this sprawling port city. He knows they can’t afford rocketing prices for staples such as wheat, rice and vegetable oil.
“Every day, I face the agony of the people when they come to my shop to buy food,” says Khan, 54. “So many people - especially poor people - can’t eat three times a day. They eat once a day. The government does not seem interested in doing anything to help them.”
Such worries are common in Pakistan even though, by some traditional measures, the country’s economy appears to be booming. An influx of foreign aid and investment from the United States and elsewhere has primarily benefited the rich, while many in the poor and middle classes say their standard of living is getting worse.
Pakistan has many problems - political turmoil after last month’s assassination of Benazir Bhutto, a Taliban insurgency along the Afghan border and rampant corruption among them. Yet economic concerns will be the biggest issue as Pakistanis prepare to elect a parliament Feb. 18, according to a poll last month by the International Republican Institute.
The non-partisan U.S. group said in a statement that this was the first time its polling in Pakistan found “that the number of economic pessimists so greatly exceeded the number of economic optimists.” According to the poll:
51per cent said their personal economic situations had deteriorated over the past year, while 25per cent reported improvement. 53per cent said inflation was the No. 1 issue they would consider when voting, 15per cent said unemployment, 9per cent said poverty. Six percent cited terrorism, 3per cent corruption and 2per cent democratic change.
33per cent said they expected economic conditions to get worse over the next year, although 26per cent expected improvement. Ordinary Pakistanis don’t sound confident the election will bring any relief. Bhutto’s populist Pakistan Peoples Party has campaigned on assisting the needy. “The poor people had hope about Benazir,” Khan says. “Since she was killed, their hope has died.”
Karachi driver Irshad Anwar, 38, has started working 12- and 16-hour days to bring in more money, and for the first time, his wife has had to find a job. “Life is more difficult than ever,” he says.
Getting rich quick : Looking at Pakistan’s recent economic record, the misery on the streets seems hard to explain. Under pro-U.S. President Pervez Musharraf, annual economic growth has averaged more than 7per cent the past five years. Pakistan’s stock market soared 40per cent in 2007. Foreign investment - especially in telecommunications and banking - has been pouring into the country, surging 46per cent to $5.1 billion in the year that ended last June.
Nouveau-riche bankers, stock brokers and computer technicians tool around in new cars, enjoy expensive dinners, buy lavish houses and travel abroad. Mercedes sales rose steadily 10per cent to 15per cent a year from 2002 to 2006.
After relying on diplomats, expatriate executives and traditionally wealthy families, “there is a new category of customer: people who became rich quickly,” says Naseem Shaikh, director of the firm that distributes Mercedes cars in Pakistan.
Many economists give Musharraf and his economic team - led until recently by former prime minister and Citibank executive Shaukat Aziz - high marks for their economic policies. Musharraf’s government lowered trade barriers, improved tax collection, sold off state assets and encouraged foreign investment. “They’ve done a tremendous job,” says Maheen Rahman, head of research at the Karachi investment firm BMA Capital. But Pakistan’s working class isn’t sharing in the bounty.
Sakib Sherani, chief economist at ABN Amro Bank Pakistan, says he’s seen the same story before: Whenever Pakistan snuggles up to the United States - as it did after the Sept. 11 terrorist attacks - it enjoys a windfall of aid that props up economic numbers and enriches Pakistani elites without doing much for average citizens.
Since Musharraf enlisted in the U.S. war on terror, Pakistan has received more than $10 billion in aid, most of it going to the country’s powerful military. “You don’t get much trickle-down from an F-16,” says Husain Haqqani, a former Bhutto adviser who is director of Boston University’s Center for International Relations. “The economy is growing?” asks Aslam Magsi, 40, a farmer in the rural community of Tando Jam outside Karachi. “Only for the army and the establishment.”
More pressures: Political uncertainty also takes an increased toll. The stock market ended 2007 with a thud after Bhutto’s death, though it had a strong year overall. Mercedes sales dropped 20per cent last year. “This year is going to be worse,” Shaikh says.
He expects consumers to hunker down until they see whether Pakistan can get safely through an election. The campaign has been marred by violence, including a bombing in October that killed more than 140 of Bhutto’s supporters, her assassination Dec. 27 and a wave of deadly rioting that followed her death. Even before the latest violence, the Asian Development Bank expected growth to slow to 6.5per cent this year from a forecast 7 per cent in 2007.
Rahman says the government can’t do much about many of the economic pressures squeezing ordinary people. Surging food prices are a worldwide phenomenon - a result of things such as an Australian drought that cut worldwide wheat supply and raised prices.
Sherani of ABN Amro agrees that many of the immediate economic problems are beyond the government’s control, but he says the government should take other steps - such as directing more spending to education and health care - that would help poor and middle-class Pakistanis and give them something they’re missing: hope. “Our regular life has become miserable,” says Karachi housewife Gulnaz Bano, 33. “We don’t know where to go or what to do.”
Wednesday, January 16, 2008
By Paul Wiseman and Zafar M Sheikh
KARACHI: Idrees Khan feels sorry for his customers when he totals their bills at his general store in this sprawling port city. He knows they can’t afford rocketing prices for staples such as wheat, rice and vegetable oil.
“Every day, I face the agony of the people when they come to my shop to buy food,” says Khan, 54. “So many people - especially poor people - can’t eat three times a day. They eat once a day. The government does not seem interested in doing anything to help them.”
Such worries are common in Pakistan even though, by some traditional measures, the country’s economy appears to be booming. An influx of foreign aid and investment from the United States and elsewhere has primarily benefited the rich, while many in the poor and middle classes say their standard of living is getting worse.
Pakistan has many problems - political turmoil after last month’s assassination of Benazir Bhutto, a Taliban insurgency along the Afghan border and rampant corruption among them. Yet economic concerns will be the biggest issue as Pakistanis prepare to elect a parliament Feb. 18, according to a poll last month by the International Republican Institute.
The non-partisan U.S. group said in a statement that this was the first time its polling in Pakistan found “that the number of economic pessimists so greatly exceeded the number of economic optimists.” According to the poll:
51per cent said their personal economic situations had deteriorated over the past year, while 25per cent reported improvement. 53per cent said inflation was the No. 1 issue they would consider when voting, 15per cent said unemployment, 9per cent said poverty. Six percent cited terrorism, 3per cent corruption and 2per cent democratic change.
33per cent said they expected economic conditions to get worse over the next year, although 26per cent expected improvement. Ordinary Pakistanis don’t sound confident the election will bring any relief. Bhutto’s populist Pakistan Peoples Party has campaigned on assisting the needy. “The poor people had hope about Benazir,” Khan says. “Since she was killed, their hope has died.”
Karachi driver Irshad Anwar, 38, has started working 12- and 16-hour days to bring in more money, and for the first time, his wife has had to find a job. “Life is more difficult than ever,” he says.
Getting rich quick : Looking at Pakistan’s recent economic record, the misery on the streets seems hard to explain. Under pro-U.S. President Pervez Musharraf, annual economic growth has averaged more than 7per cent the past five years. Pakistan’s stock market soared 40per cent in 2007. Foreign investment - especially in telecommunications and banking - has been pouring into the country, surging 46per cent to $5.1 billion in the year that ended last June.
Nouveau-riche bankers, stock brokers and computer technicians tool around in new cars, enjoy expensive dinners, buy lavish houses and travel abroad. Mercedes sales rose steadily 10per cent to 15per cent a year from 2002 to 2006.
After relying on diplomats, expatriate executives and traditionally wealthy families, “there is a new category of customer: people who became rich quickly,” says Naseem Shaikh, director of the firm that distributes Mercedes cars in Pakistan.
Many economists give Musharraf and his economic team - led until recently by former prime minister and Citibank executive Shaukat Aziz - high marks for their economic policies. Musharraf’s government lowered trade barriers, improved tax collection, sold off state assets and encouraged foreign investment. “They’ve done a tremendous job,” says Maheen Rahman, head of research at the Karachi investment firm BMA Capital. But Pakistan’s working class isn’t sharing in the bounty.
Sakib Sherani, chief economist at ABN Amro Bank Pakistan, says he’s seen the same story before: Whenever Pakistan snuggles up to the United States - as it did after the Sept. 11 terrorist attacks - it enjoys a windfall of aid that props up economic numbers and enriches Pakistani elites without doing much for average citizens.
Since Musharraf enlisted in the U.S. war on terror, Pakistan has received more than $10 billion in aid, most of it going to the country’s powerful military. “You don’t get much trickle-down from an F-16,” says Husain Haqqani, a former Bhutto adviser who is director of Boston University’s Center for International Relations. “The economy is growing?” asks Aslam Magsi, 40, a farmer in the rural community of Tando Jam outside Karachi. “Only for the army and the establishment.”
More pressures: Political uncertainty also takes an increased toll. The stock market ended 2007 with a thud after Bhutto’s death, though it had a strong year overall. Mercedes sales dropped 20per cent last year. “This year is going to be worse,” Shaikh says.
He expects consumers to hunker down until they see whether Pakistan can get safely through an election. The campaign has been marred by violence, including a bombing in October that killed more than 140 of Bhutto’s supporters, her assassination Dec. 27 and a wave of deadly rioting that followed her death. Even before the latest violence, the Asian Development Bank expected growth to slow to 6.5per cent this year from a forecast 7 per cent in 2007.
Rahman says the government can’t do much about many of the economic pressures squeezing ordinary people. Surging food prices are a worldwide phenomenon - a result of things such as an Australian drought that cut worldwide wheat supply and raised prices.
Sherani of ABN Amro agrees that many of the immediate economic problems are beyond the government’s control, but he says the government should take other steps - such as directing more spending to education and health care - that would help poor and middle-class Pakistanis and give them something they’re missing: hope. “Our regular life has become miserable,” says Karachi housewife Gulnaz Bano, 33. “We don’t know where to go or what to do.”
while the economy has boomed overall teh trickle down effect has not been felt by the common man.
i'm not sure if this is typical pessimism or whether indeed there needs to be more evidence of the average man getting richer. Inflation has a detrimental effect on the average man, and must be controlled better in a country where wage increases don't always go hand in hand with inflation.
i'm not sure if this is typical pessimism or whether indeed there needs to be more evidence of the average man getting richer. Inflation has a detrimental effect on the average man, and must be controlled better in a country where wage increases don't always go hand in hand with inflation.
QUOTE(Wing Commander @ Jan 16 2008, 09:21 AM) 
while the economy has boomed overall teh trickle down effect has not been felt by the common man.
i'm not sure if this is typical pessimism or whether indeed there needs to be more evidence of the average man getting richer. Inflation has a detrimental effect on the average man, and must be controlled better in a country where wage increases don't always go hand in hand with inflation.
i'm not sure if this is typical pessimism or whether indeed there needs to be more evidence of the average man getting richer. Inflation has a detrimental effect on the average man, and must be controlled better in a country where wage increases don't always go hand in hand with inflation.
It's a huge problem...the way we're going, we'll end up like India and Brazil, that is just the current system of capitalism/neo-liberal economics.
Management, regulation and fair-distribution of resources need to be undertaken; the elites need to contribute to the masses...all this needs work.
Mark I think most people would agree the question is how to do it. you cannot give things to the poor, these schemes are a by word for corruption and simply engender a culture of dependency on the state. the poor must given opportunites to earn the money, though I'm unsure how you could do this.
Education is the best I can think of, not only free education but make everyone under 16 go to school without exception in the medium term, coupled with literacy programs for adults. Education is the best way for people to dig themselves out of poverty. Howeve in the short term anyuone have any suggestions.
Education is the best I can think of, not only free education but make everyone under 16 go to school without exception in the medium term, coupled with literacy programs for adults. Education is the best way for people to dig themselves out of poverty. Howeve in the short term anyuone have any suggestions.
Mark I think most people would agree the question is how to do it. you cannot give things to the poor, these schemes are a by word for corruption and simply engender a culture of dependency on the state. the poor must given opportunites to earn the money, though I'm unsure how you could do this.
Education is the best I can think of, not only free education but make everyone under 16 go to school without exception in the medium term, coupled with literacy programs for adults. Education is the best way for people to dig themselves out of poverty. Howeve in the short term anyone have any suggestions?
Education is the best I can think of, not only free education but make everyone under 16 go to school without exception in the medium term, coupled with literacy programs for adults. Education is the best way for people to dig themselves out of poverty. Howeve in the short term anyone have any suggestions?
QUOTE(Wing Commander @ Jan 16 2008, 10:56 AM)
Mark I think most people would agree the question is how to do it. you cannot give things to the poor, these schemes are a by word for corruption and simply engender a culture of dependency on the state. the poor must given opportunites to earn the money, though I'm unsure how you could do this.
Education is the best I can think of, not only free education but make everyone under 16 go to school without exception in the medium term, coupled with literacy programs for adults. Education is the best way for people to dig themselves out of poverty. Howeve in the short term anyone have any suggestions?
Education is the best I can think of, not only free education but make everyone under 16 go to school without exception in the medium term, coupled with literacy programs for adults. Education is the best way for people to dig themselves out of poverty. Howeve in the short term anyone have any suggestions?
Education is only an aspect of it, but the elites have a responsibility to those less fortunate. The world we live in is such that one man's success becomes another's failure, and we - the elites - ignore it. Pakistan cannot introduce massive socialist benefits such as universal health, and perhaps education might be stretching it if we concentrate on secular public schools. We need to realize that Pakistan has inherited three major social-fuel reserves:
1) Islam...i.e. the underlying fabric of our society; the madrassahs; the Muslim financial support foundations and the pillar regarding Zakat.
2) Very rich and influential elites...
3) 3rd world socio-economic aspects; a lot of untapped natural resources, reliance on 1-2 resources, reliance on international market, etc.
Now it is the time to exploit these inherited resources and bring the country forward - and perhaps set standards. One thing I have always thought about is...how about more Shaukat Khanum Memorial hospitals, as well as schools and universities? Not by name, but by the concept of strengthening citizen responsibility and obligation to an aspect of the state - the masses. Imagine if a jointly developed formulaic policy was undertaken to produce 1st rate private hospitals that can provide free treatment through private funding from Pakistani elites, and perhaps international aid? Now imagine how much more effective it would be if we localized as much of the content and brought down the costs as much as possible while retaining the 1st-world quality - imagine the knowledge-export potential to African, Asian and even maybe European countries! Obviously the government can also finance the care of the people, but at least it would not be the sole provider, and perhaps we could skip out on private tax so long as people make a commitment to Shaukat Khanum-like organizations.
Similarly with the Madrassahs...why shouldn't the people - especially Middle Class - help finance them? The Madrassahs provide literary education to poor and destitute children, so why not obligate every person who uses the secular public school system to help finance the Madrassahs? This can be used as a direct replacement to tax and accountability can be as clear as clean water. If the middle class donate their views, opinions and demands for Madrassah funding, then imagine the sort of change we could see in a highly wide spread education system. Again the government too needs to finance it - but it can set a standard curriculum.
Now imagine the money of the elites going into investing promising university students...just in return that the university students work for the feudals. The government should push the feudals to invest in R&D and industrial-centric business, and watch Pakistan's talent pool be exploited.
Fellows keep in mind that the world economy is also going through uncertain times due to fears of US going into a recession due to massive bad debts in its Sub Prime Mortgage sector.
There are serious fundamental changes that Pakistan has to go through.
- Strengthening of the monopoly control authority against cartels, vested interest
- They have been increasing interest rates to control inflation. They should have limited that and concentrate on supply side factors, such as bad infrastructure hampering competitive prices of goods
- zakat system needs to be refurbished altogether
- total energy meltdown. Too much emphasis on hydropower. Coal, solar, wind, biodiesel, ethanol mix. Use them.
- Strengthening of the monopoly control authority against cartels, vested interest
- They have been increasing interest rates to control inflation. They should have limited that and concentrate on supply side factors, such as bad infrastructure hampering competitive prices of goods
- zakat system needs to be refurbished altogether
- total energy meltdown. Too much emphasis on hydropower. Coal, solar, wind, biodiesel, ethanol mix. Use them.
interesting stuff Mark,
I'm not sure about the rich funding hospitals, I'm not sure how practical that is. but the middle class who pay for good schools, if they are taxed to pay for government regulated madressas is a good idea. The problem again is that Pakistan has continually shown as soon as the state gets hold of anything, the people in charge corrupt any resources alllocated to it. One of Pakistan's main problems is that the state is involved in far too many activities, they cannot watch everything. The bits not being watched, are ruled by bribery and misallocation of resources.
We need aggressive privatisation so that only the industry are regulated by the state, like here in the uk. Leave the rest to the private sector.
mothsmoke is also right about taking action against monopolies and cartels, this is where the average man will start to receive big positive changes to his lifestyle. It is about empowering the citizen, to make hiw own decisions rather then leaving them reliant on cartels and monopolies.
now the question is how do we get the state to implement such ideas?
I'm not sure about the rich funding hospitals, I'm not sure how practical that is. but the middle class who pay for good schools, if they are taxed to pay for government regulated madressas is a good idea. The problem again is that Pakistan has continually shown as soon as the state gets hold of anything, the people in charge corrupt any resources alllocated to it. One of Pakistan's main problems is that the state is involved in far too many activities, they cannot watch everything. The bits not being watched, are ruled by bribery and misallocation of resources.
We need aggressive privatisation so that only the industry are regulated by the state, like here in the uk. Leave the rest to the private sector.
mothsmoke is also right about taking action against monopolies and cartels, this is where the average man will start to receive big positive changes to his lifestyle. It is about empowering the citizen, to make hiw own decisions rather then leaving them reliant on cartels and monopolies.
now the question is how do we get the state to implement such ideas?
The main problem in Pakistan is the political instability.
Currently the world is going through an economic slowdown and the US may even be at the brink of a recession. This all will have a huge impact on Pakistan. The recent credit crunch have exhausted all income potential from the west for the coming year.
The key buzz word now are emerging markets and developing nations, they have massive potential for growth as their domestic consumpiton needs to be fulfilled. Income derived products and services can and are yielding big results. Pakistan needs to grab this opportunity by showing a stable and controlled political environment, law and order, investment in infrastructure and incentives for growth and investment in a nationalistic level.
Currently the world is going through an economic slowdown and the US may even be at the brink of a recession. This all will have a huge impact on Pakistan. The recent credit crunch have exhausted all income potential from the west for the coming year.
The key buzz word now are emerging markets and developing nations, they have massive potential for growth as their domestic consumpiton needs to be fulfilled. Income derived products and services can and are yielding big results. Pakistan needs to grab this opportunity by showing a stable and controlled political environment, law and order, investment in infrastructure and incentives for growth and investment in a nationalistic level.
QUOTE(ABBASIA @ Jan 15 2008, 08:42 PM)
Economy worries Pakistanis
Wednesday, January 16, 2008
By Paul Wiseman and Zafar M Sheikh
KARACHI: Idrees Khan feels sorry for his customers when he totals their bills at his general store in this sprawling port city. He knows they can’t afford rocketing prices for staples such as wheat, rice and vegetable oil.
“Every day, I face the agony of the people when they come to my shop to buy food,” says Khan, 54. “So many people - especially poor people - can’t eat three times a day. They eat once a day. The government does not seem interested in doing anything to help them.”
Such worries are common in Pakistan even though, by some traditional measures, the country’s economy appears to be booming. An influx of foreign aid and investment from the United States and elsewhere has primarily benefited the rich, while many in the poor and middle classes say their standard of living is getting worse.
Pakistan has many problems - political turmoil after last month’s assassination of Benazir Bhutto, a Taliban insurgency along the Afghan border and rampant corruption among them. Yet economic concerns will be the biggest issue as Pakistanis prepare to elect a parliament Feb. 18, according to a poll last month by the International Republican Institute.
The non-partisan U.S. group said in a statement that this was the first time its polling in Pakistan found “that the number of economic pessimists so greatly exceeded the number of economic optimists.” According to the poll:
51per cent said their personal economic situations had deteriorated over the past year, while 25per cent reported improvement. 53per cent said inflation was the No. 1 issue they would consider when voting, 15per cent said unemployment, 9per cent said poverty. Six percent cited terrorism, 3per cent corruption and 2per cent democratic change.
33per cent said they expected economic conditions to get worse over the next year, although 26per cent expected improvement. Ordinary Pakistanis don’t sound confident the election will bring any relief. Bhutto’s populist Pakistan Peoples Party has campaigned on assisting the needy. “The poor people had hope about Benazir,” Khan says. “Since she was killed, their hope has died.”
Karachi driver Irshad Anwar, 38, has started working 12- and 16-hour days to bring in more money, and for the first time, his wife has had to find a job. “Life is more difficult than ever,” he says.
Getting rich quick : Looking at Pakistan’s recent economic record, the misery on the streets seems hard to explain. Under pro-U.S. President Pervez Musharraf, annual economic growth has averaged more than 7per cent the past five years. Pakistan’s stock market soared 40per cent in 2007. Foreign investment - especially in telecommunications and banking - has been pouring into the country, surging 46per cent to $5.1 billion in the year that ended last June.
Nouveau-riche bankers, stock brokers and computer technicians tool around in new cars, enjoy expensive dinners, buy lavish houses and travel abroad. Mercedes sales rose steadily 10per cent to 15per cent a year from 2002 to 2006.
After relying on diplomats, expatriate executives and traditionally wealthy families, “there is a new category of customer: people who became rich quickly,” says Naseem Shaikh, director of the firm that distributes Mercedes cars in Pakistan.
Many economists give Musharraf and his economic team - led until recently by former prime minister and Citibank executive Shaukat Aziz - high marks for their economic policies. Musharraf’s government lowered trade barriers, improved tax collection, sold off state assets and encouraged foreign investment. “They’ve done a tremendous job,” says Maheen Rahman, head of research at the Karachi investment firm BMA Capital. But Pakistan’s working class isn’t sharing in the bounty.
Sakib Sherani, chief economist at ABN Amro Bank Pakistan, says he’s seen the same story before: Whenever Pakistan snuggles up to the United States - as it did after the Sept. 11 terrorist attacks - it enjoys a windfall of aid that props up economic numbers and enriches Pakistani elites without doing much for average citizens.
Since Musharraf enlisted in the U.S. war on terror, Pakistan has received more than $10 billion in aid, most of it going to the country’s powerful military. “You don’t get much trickle-down from an F-16,” says Husain Haqqani, a former Bhutto adviser who is director of Boston University’s Center for International Relations. “The economy is growing?” asks Aslam Magsi, 40, a farmer in the rural community of Tando Jam outside Karachi. “Only for the army and the establishment.”
More pressures: Political uncertainty also takes an increased toll. The stock market ended 2007 with a thud after Bhutto’s death, though it had a strong year overall. Mercedes sales dropped 20per cent last year. “This year is going to be worse,” Shaikh says.
He expects consumers to hunker down until they see whether Pakistan can get safely through an election. The campaign has been marred by violence, including a bombing in October that killed more than 140 of Bhutto’s supporters, her assassination Dec. 27 and a wave of deadly rioting that followed her death. Even before the latest violence, the Asian Development Bank expected growth to slow to 6.5per cent this year from a forecast 7 per cent in 2007.
Rahman says the government can’t do much about many of the economic pressures squeezing ordinary people. Surging food prices are a worldwide phenomenon - a result of things such as an Australian drought that cut worldwide wheat supply and raised prices.
Sherani of ABN Amro agrees that many of the immediate economic problems are beyond the government’s control, but he says the government should take other steps - such as directing more spending to education and health care - that would help poor and middle-class Pakistanis and give them something they’re missing: hope. “Our regular life has become miserable,” says Karachi housewife Gulnaz Bano, 33. “We don’t know where to go or what to do.”
Wednesday, January 16, 2008
By Paul Wiseman and Zafar M Sheikh
KARACHI: Idrees Khan feels sorry for his customers when he totals their bills at his general store in this sprawling port city. He knows they can’t afford rocketing prices for staples such as wheat, rice and vegetable oil.
“Every day, I face the agony of the people when they come to my shop to buy food,” says Khan, 54. “So many people - especially poor people - can’t eat three times a day. They eat once a day. The government does not seem interested in doing anything to help them.”
Such worries are common in Pakistan even though, by some traditional measures, the country’s economy appears to be booming. An influx of foreign aid and investment from the United States and elsewhere has primarily benefited the rich, while many in the poor and middle classes say their standard of living is getting worse.
Pakistan has many problems - political turmoil after last month’s assassination of Benazir Bhutto, a Taliban insurgency along the Afghan border and rampant corruption among them. Yet economic concerns will be the biggest issue as Pakistanis prepare to elect a parliament Feb. 18, according to a poll last month by the International Republican Institute.
The non-partisan U.S. group said in a statement that this was the first time its polling in Pakistan found “that the number of economic pessimists so greatly exceeded the number of economic optimists.” According to the poll:
51per cent said their personal economic situations had deteriorated over the past year, while 25per cent reported improvement. 53per cent said inflation was the No. 1 issue they would consider when voting, 15per cent said unemployment, 9per cent said poverty. Six percent cited terrorism, 3per cent corruption and 2per cent democratic change.
33per cent said they expected economic conditions to get worse over the next year, although 26per cent expected improvement. Ordinary Pakistanis don’t sound confident the election will bring any relief. Bhutto’s populist Pakistan Peoples Party has campaigned on assisting the needy. “The poor people had hope about Benazir,” Khan says. “Since she was killed, their hope has died.”
Karachi driver Irshad Anwar, 38, has started working 12- and 16-hour days to bring in more money, and for the first time, his wife has had to find a job. “Life is more difficult than ever,” he says.
Getting rich quick : Looking at Pakistan’s recent economic record, the misery on the streets seems hard to explain. Under pro-U.S. President Pervez Musharraf, annual economic growth has averaged more than 7per cent the past five years. Pakistan’s stock market soared 40per cent in 2007. Foreign investment - especially in telecommunications and banking - has been pouring into the country, surging 46per cent to $5.1 billion in the year that ended last June.
Nouveau-riche bankers, stock brokers and computer technicians tool around in new cars, enjoy expensive dinners, buy lavish houses and travel abroad. Mercedes sales rose steadily 10per cent to 15per cent a year from 2002 to 2006.
After relying on diplomats, expatriate executives and traditionally wealthy families, “there is a new category of customer: people who became rich quickly,” says Naseem Shaikh, director of the firm that distributes Mercedes cars in Pakistan.
Many economists give Musharraf and his economic team - led until recently by former prime minister and Citibank executive Shaukat Aziz - high marks for their economic policies. Musharraf’s government lowered trade barriers, improved tax collection, sold off state assets and encouraged foreign investment. “They’ve done a tremendous job,” says Maheen Rahman, head of research at the Karachi investment firm BMA Capital. But Pakistan’s working class isn’t sharing in the bounty.
Sakib Sherani, chief economist at ABN Amro Bank Pakistan, says he’s seen the same story before: Whenever Pakistan snuggles up to the United States - as it did after the Sept. 11 terrorist attacks - it enjoys a windfall of aid that props up economic numbers and enriches Pakistani elites without doing much for average citizens.
Since Musharraf enlisted in the U.S. war on terror, Pakistan has received more than $10 billion in aid, most of it going to the country’s powerful military. “You don’t get much trickle-down from an F-16,” says Husain Haqqani, a former Bhutto adviser who is director of Boston University’s Center for International Relations. “The economy is growing?” asks Aslam Magsi, 40, a farmer in the rural community of Tando Jam outside Karachi. “Only for the army and the establishment.”
More pressures: Political uncertainty also takes an increased toll. The stock market ended 2007 with a thud after Bhutto’s death, though it had a strong year overall. Mercedes sales dropped 20per cent last year. “This year is going to be worse,” Shaikh says.
He expects consumers to hunker down until they see whether Pakistan can get safely through an election. The campaign has been marred by violence, including a bombing in October that killed more than 140 of Bhutto’s supporters, her assassination Dec. 27 and a wave of deadly rioting that followed her death. Even before the latest violence, the Asian Development Bank expected growth to slow to 6.5per cent this year from a forecast 7 per cent in 2007.
Rahman says the government can’t do much about many of the economic pressures squeezing ordinary people. Surging food prices are a worldwide phenomenon - a result of things such as an Australian drought that cut worldwide wheat supply and raised prices.
Sherani of ABN Amro agrees that many of the immediate economic problems are beyond the government’s control, but he says the government should take other steps - such as directing more spending to education and health care - that would help poor and middle-class Pakistanis and give them something they’re missing: hope. “Our regular life has become miserable,” says Karachi housewife Gulnaz Bano, 33. “We don’t know where to go or what to do.”
I expect to see worse times than these ahead.......just like the US DEFICIT and DEBT accrued by the FRACTIONAL RESERVE BANKING SYSTEM, slowly but surely bringing the economy to it's knees here with a possible DEPRESSION WORSE THAN THE 1929 here (85% - 100% probability), we will go down with the sinking ship. I guess we pay the price of being "copycating niggers" who tend to see Western governments have the "best of everything around" without properly ANALYZING it..woo let's copy them..it's so "civilized"...
well....as time goes by...it's will get real ugly...NO MATTER WHO THE PRESIDENT IS. unless they get this country out of the FRACTIONAL RESERVE BANKING SYSTEM. If every "rupee" printed is "debt" like the dollar to the US government....we are going to be in SERIOUS SH*IT...very very serious sh*it later on.
Apart from this, food supply shortages have been the lack of responsibility of the government to set quotas on exports based on supply and demand...or failure to import just as much of a certain food commodity as exported. When there is no balance, no matter if you have OIL, or any other abundance of resources...., the society is in for serious trouble.
I'm not surprised. This was expected years back for me.
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