Through the eye of the needle
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By the end of 2014 the US-led forces in Afghanistan will have withdrawn, and the fear that the ongoing insurgency may degenerate into a full-blown civil war could become a self-fulfilling prophesy.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