Through the eye of the nee­dle

The Pak Banker - - Front Page -

bling econ­omy, and this will be fur­ther com­pounded by the peren­nial in­ci­dents of ter­ror­ist vi­o­lence in which even chil­dren are de­lib­er­ately tar­geted.

By the end of 2014 the US-led forces in Afghanistan will have with­drawn, and the fear that the on­go­ing in­sur­gency may de­gen­er­ate into a full-blown civil war could be­come a self-ful­fill­ing proph­esy. Tur­moil pro­vides the ideal breed­ing ground for ter­ror­ist groups and the im­pli­ca­tion is that the Tehreek-e-Tal­iban Pak­istan, along with its af­fil­i­ates, will have ac­quired “strate­gic depth” in Afghanistan. Fur­ther­more, the chaos will in­evitably trig­ger a mas­sive in­flux of refugees into Pak­istan which its frag­ile econ­omy can­not sus­tain.

De­spite this, there has been no vis­i­ble ef­fort by the gov­ern­ment to pre-empt the loom­ing cri­sis. There is a des­per­ate need to pro­mote an in­tra-Afghan di­a­logue in concert with the Karzai regime, be­fore it is too late. On a par­al­lel track, the launch of full­blooded mil­i­tary op­er­a­tions against ter­ror­ist groups en­trenched in North Waziris­tan has be­come un­avoid­able. The al­ter­na­tive is the con­tin­u­a­tion of ex­trem­ist vi­o­lence which has re­sulted in the slaugh­ter of more than 40,000 civil­ians and has wrought havoc on the econ­omy. The per­ilous se­cu­rity en­vi­ron­ment, plus the en­ergy cri­sis, has re­sulted in a record 69 per­cent fall in for­eign di­rect in­vest­ment (FDI) in the first two months of the cur­rent fis­cal year. In Septem­ber the State Bank re­ported that FDI had plum­meted to $33 mil­lion, com­pared to $99 mil­lion in the cor­re­spond­ing pe­riod of the pre­vi­ous year. This has grave im­pli­ca­tions for the cur­rent ac­count and the for­eign ex­change re­serves of the coun­try.

The pro­jec­tions of the IMF are no less dis­qui­et­ing. It warns that the bud­get deficit could soar to an un­prece­dented 11 per­cent of the GDP in fis­cal year 2012-2013. In July-Au­gust, the first two months of the cur­rent fis­cal year, this stood at Rs191 bil­lion, or 0.8 per­cent of the GDP, while the pub­lic-sec­tor debt has climbed to 10 per- cent. With elec­tions round the cor­ner, this is likely to reach alarm­ing lev­els.

But the lead­ers of the coun­try live in a world of their own. Like the gods of Epi­cu­rus they dwell in empyrean heights and are un­able to read the signs of an im­pend­ing eco­nomic dis­as­ter. In Au­gust the State Bank claimed that the for­eign ex­change re­serves of the coun­try stood at $15.2 bil­lion. But Dr Muham­mad Yaqub, a for­mer gover­nor of the State Bank, re­cently ex­plained that this amount in­cluded $ 4.5 bil­lion for­eign cur­rency de­posits of pri­vate in­di­vid­u­als, plus the manda­tory de­posit, es­ti­mated at ap­prox­i­mately $1.1 bil­lion that com­mer­cial banks are re­quired to make with

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