Friday, June 3, 2011

Pakistan: Bad news, again

As expected, Pakistan’s key economic indicators remain depressing. According to the Economic Survey of Pakistan 2010-11, the country’s real Gross Domestic Product growth is estimated at a slim 2.4 percent against the targeted 4.5 percent. Inflation remains in double digits, hovering at around 14.1 percent in the first 10 months of the current fiscal year, compared to 11.5 percent during the same period a year ago. Moreover, the fiscal deficit has been estimated at 5.9 percent for the year, while public debt has shown a sharp increase of 13.1 percent in the first nine months of the current fiscal year.

One can continue citing figures, which overwhelmingly paint a grim picture of Pakistan’s economy. But were we expecting any different? In a country shaken to its core by terrorism, continued political instability, inconsistent policies, and an unprecedented energy crisis, the economy often remains the first causality. Last year’s devastating floods only added to the country’s woes. According to government estimates, floods wiped out a staggering two percent from economic growth. The surging oil and food prices also proved mighty blows on the fragile economy, already reeling from internal challenges. All these factors contributed towards making life miserable for the common man. The unemployment rate grew by 5.6 percent, while instances of poverty increased.

However, the blame for dismal economic figures cannot be placed on these internal and external factors alone. The impact of these challenges compounded because the government proved slow to act and kept dragging its feet on crucial reforms - this includes its failure to expand the tax base to that of restructuring public sector enterprises, which alone need an injection of more than 250 billion rupees in subsidies just to remain afloat. The government’s debt management strategy, fiscal austerity, and rationalising the subsidy regime also left a lot to be desired. The only saving grace for this outgoing fiscal year remains the robust external sector thanks to a record surge in remittances by overseas Pakistanis and high exports, which are expected to cross $24 billion by the end of the year. Sadly, no credit can be given for this to the government. Let’s hope that in the 2011-12 fiscal year, the finance minister and his team manage to take those tough and difficult decisions, which are vital to pull the country out of its low growth and high inflation cycle. For this, mobilising internal resources, scrapping subsidies, and taking measures against vested interests remain vital. Whether this team will be able to do so remains a multi-million dollar question.

Pakistani troops fight militants from across Afghan border for 3rd day, at least 63 dead

Washington Post
Pakistani helicopters and artillery on Friday forced back militants who crossed over from Afghanistan this week and triggered battles that have killed at least 63 people, an official said. The incursion prompted Islamabad to demand that NATO and Afghan troops do more to control insurgents on their side of the long, porous border.

Up to 400 militants are said to have infiltrated into Pakistan’s Upper Dir region from Afghanistan’s Kunar province on Wednesday. They attacked a security checkpoint, villages and schools, according to the Pakistani government.Regional administrator Ghulam Mohammad Khan said the militants were retreating Friday, and Pakistani troops were still attacking them in Nustrat Darra district.

As of Thursday night, 25 soldiers, 35 militants and three civilians had died in the clashes, Khan said. He had no information about casualties from Friday’s fighting,

The militant attack and Pakistan’s reaction contradicted the usual U.S. narrative about the poorly defined boundary that runs through rough country for about 1,600 miles (2,600 kilometers). Typically, militant cross-border movements originate in Pakistan, leaving the United States and NATO to complain to Islamabad over its failure to stop the infiltration into Afghanistan.

This time the situation was reversed.

The new battles found Pakistan the aggrieved party, lending credence to Pakistani army commanders’ complaints that NATO was failing to crack down on militants sheltering on the Afghan side of the rugged region.

A Pakistani government statement late Thursday said the foreign secretary had “stressed the need for stern action by the Afghan army, U.S. and NATO/ISAF forces in the area against militants and their hideouts in Afghanistan and against organizational support for the militants.”

Beyond emphasizing the difficulties of fighting an enemy that pays no attention to borders, the battle hints at challenges ahead for the U.S. and Pakistan when Washington begins withdrawing troops from Afghanistan later this year. Pakistan maintains that NATO already doesn’t have enough troops along the Afghan side of the border.

In the past, NATO and Pakistani forces have staged coordinated “hammer and anvil” operations against militants on the border, but relations between Washington and Islamabad have hit a particularly rough patch, especially since the unilateral American raid in Pakistan that killed Osama bin Laden on May 2.

Even so, NATO officials say that border cooperation has not suffered as a result of the chill in ties.