World - After Iceland,Pak on verge of bankruptcy

Amir Mir

ISLAMABAD: After Iceland, the current global meltdown has brought Pakistan to the brink of bankruptcy.

Highly-placed circles in the economic ministry in Islamabad have conceded that the country is on the verge of economic bankruptcy in the wake of the falling value of its rupee, rumour mongering about the future of its banking sector, the depleting foreign exchange reserves, and the plummeting stock market.

They say Pakistan’s financial reserves have nearly dried up, the rupee has dropped more than 21% in value since the start of 2008 and the central bank currently holds not more than $8 billion in foreign currency. If Pakistan’s liabilities are carried forward, the country’s actual forex reserves may come to only $3 billion, sufficient to buy hardly a month’s staple imports such as foodstuffs and oil.

Given the country’s standing as a frontline state in the US-led war on terror, the economic crisis is having deep consequences.

Government sources say country already faces worsening security situation even as the army clashes with militants in the lawless tribal areas along the north-west frontier with Afghanistan.

The sources pointed out that Pakistani President Asif Ali Zardari recently told The Wall Street Journal that the country needs $100 billion in bailout money from other countries to avoid going bankrupt.

“If I can’t pay my own oil bill, how am I going to increase my police? The oil companies are asking me to pay $135 [per barrel] and at the same time they want me to keep the world peaceful and Pakistan peaceful,” he said.

The ratings agency Standard and Poor’s has already given Pakistan’s sovereign debt a grade of CCC +, only a few notches above the default level. Under these circumstances, there are those in the establishment who believe the economic crisis might bring down Pakistan’s newly elected government, which is facing a crisis of confidence already as it battles 25% inflation, a drowning currency and a President with a reputation as “Mr 10%”.

Sources say it is still unclear that even a $100 billion bailout would be enough to stave off Pakistan’s money woes since the worsening law and order situation is itself feeding the economic crisis there — investors aren’t interested in a nation so obviously on the verge of failure.