Provided by a contributor to Take Back Pakistan

Recent reports in the western media indicate that Pakistan needs as much as $10 billion to avoid an economic meltdown and Pakistan’s foreign currency reserves are:

• falling fast and if forward liabilities are included, the real reserves may go down to $3 billion. This cannot meet the import bill of one whole month*.
• Out of total reserves of $8.467 billion, the reserves held by the commercial banks stood at $3.461 billion on September 23. From September 22, the reserves fell by around $180 million, as there were no receipts while the government made heavy payments for oil and other imports.
• This week, Moody’s Investors Service lowered Pakistan’s credit outlook to negative due to the risk of “missed repayments” on the nation’s debt.

Pakistan’s “gradual economic decline, which started last year”, alarmed the United States and Britain as they feared that financial chaos could allow terrorists to deepen their roots in the country.

To avoid such an eventuality, they decided to launch a new group of donors.

Read more about our dismal state here: ‘Friends’ unveil initiative to avert collapse: Over $15bn needed

It is interesting to note that former President Musharraf inherited a far more fledgling Pakistan in 1999, a Pakistan which was on the verge of being declared a terrorist, bankrupt and a failed state. Musharraf inherited a Pakistan which had less than a billion dollars as foreign reserves, with an economy the mere size of $75 billion, and with 65% of our GDP used for debt servicing. Although currently our economy is fast deteriorating due to the incompetency of the new regime (who looted Pakistan in the past), the situation in 1999 was FAR WORSE than what it is now.

And despite not receiving the above level of support and commitment from the international community, Musharraf and his team were still able to deliver, with Pakistan’s situation improving prior to September 11, 2001. For example, Pakistan’s foreign reserves had risen up to $3.2 billion by September 10 2001.

To quote Dr.Ishrat Husain:

“In 1999, the ratio of foreign reserves held by India was 40 times that of Pakistan. “By June 2002 this ratio has declined to 8 times while the size of Indian economy is about 6 to 7 times that of Pakistan.”

Dr. Ishrat Husain goes on to say:

“It may be relevant to point out that the biggest quantum jump in our reserves had taken place between July 2000 and June 2001 i.e. well before September 2001. During this one year period the reserves increased by 138 percent to $ 3.1 billion. The rate of increase during July 2001 and June 2002 was 105 percent.”

Consider the improvement of a variety of indicators prior to September 11, 2001. We read:

“While acknowledging the salutary impact of the external account improvement, however, it is worth stressing that the trend improvement was visible well before the seminal September 11 events. Interest rates were already on the way down; foreign currency reserves were edging up; the exchange rate was relatively stable; the inflation downtrend was well defined, and the government’s continuing fiscal discipline and commitment to reforms had already set the stage for the IMF PRGF, and the subsequent re-profiling of external debt. Nonetheless, the pre-existing positive trends did gain invaluable momentum in FY02, post-September 11. However, despite these major positives, the economy was not unscathed in FY02.” Read more »

The presidential referendum in Pakistan has come and gone. As quickly as the drama enveloped the country it has been forgotten. The Pakistani nation is disappointed and fed up with the antics of the ruling classes and the referendum served only to confirm their suspicions. As expected, General Musharraf made a heap of populist promises. But sadly, till now, these promises have proven to be nothing more than meaningless rhetoric. It seemed impossible for the already dysfunctional Pakistani political culture to degenerate further. Yet this is exactly what has happened in the past two months – considerable effort will be needed to repair the damage. That said, it is important to look at global trends and draw comparisons. Despite the widespread practice of electoral democracy, there is considerable disillusion amongst citizens the world over about the responsiveness of formal politics. The recent presidential election in France is a good example of how extremist exceptions are becoming more popular in electoral polls.

More than anything else such occurrences reflect a narrowing of the political spectrum and homogenization of thought processes and ideas. In other words, ‘liberal’ market democracy has become the coveted political system of choice around the world (with Europe the exception to a certain extent). Politicians from social democratic parties espouse many of the same values that politicians from conservative parties do. In India for example, while it is the right-of-centre BJP that has unquestioningly moved toward privatization of major state-owned enterprises, it was the left-of-centre Congress government that signed loan agreements with the international financial institutions (IFIs) that set the stage for these enterprises to be privatized. All in all then, it is not surprising that extremists such as Le Pen are suddenly default beneficiaries of intense voter reaction to post-election inertia.

So maybe Pakistan’s political culture is not so dysfunctional after all. Who needs electoral democracy if it turns out to be just tokenism? The fact is that political culture cannot be judged on the elusiveness of electoral democracy. It needs to be judged on the basis of factors far more important than elections, factors that are the foundation of a robust democratic culture. A nation with a democratic culture is not necessarily one that has achieved economic democracy – no country in the world has. Similarly, a democratic culture does not necessarily mean that extremist thought and action are eliminated. Read more »