Daily Archives: July 4, 2008

Pakistan’s Economic Dilemma

In Pakistan: The Economic Dilemma

By Shahnawaz Mahmood

Roti, Kapra, aur Makan — or Bread, Clothing, and Shelter — this has been the Pakistan Peoples Party (PPP)’s slogan to woo the electorate since the 1970’s. While the PPP emerged from February’s elections with the largest majority, it did not win sufficient seats to claim control of the government and was forced to form a coalition, mainly with the Pakistan Muslim League-Nawaz (PML-N).  Given the still unresolved question of the restoration of the judiciary, including the Chief Justice of Pakistan and other judges who were dismissed by President Musharraf last year, the PML-N could withdraw from the coalition and the government’s center could collapse — unless the Musharraf-backed Pakistan Muslim League-Quaid-e-Azam (PML-Q) were to intercede. This political uncertainty surrounding the new government, combined with the worsening security situation, has inflicted a great toll on economic growth as investors are becoming wary. This will make providing such essentials as bread, clothing, and shelter increasingly difficult.

Record oil prices and high food prices are creating universal economic hardships. The Food and Agriculture Organization and International Monetary Fund have even warned of food shortages being catalysts for war in developing countries. Pakistan is no exception to such economic hardships; economic indicators in the country are worsening. Fiscal and current account deficits are both expanding, and inflationary pressures — particularly food inflation — are escalating at an unprecedented rate. According to the government’s Pakistan Economic Survey, food inflation reached more than 25% in April, the highest since 1980. In addition, Pakistan is experiencing a massive shortfall in the supply of electrical power, leading to power cuts which have not only affected industrial output but have also sparked riots in many parts of the country. Continue reading

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