World - Pakistan's real problem

Pakistan should have rather more to worry about than the correct terminology for describing militants in the Kashmir valley — some of whom might be considered plain secessionists, while others are definitely terrorists. Pakistan’s economy is close to collapse, and the country has to decide whether its current posture of aggression towards neighbours to the east and west is sustainable, not just diplomatically and militarily but also economically. Inflation is running at 24 per cent, with food inflation at 32 per cent. The current account deficit (on trade in goods and services) is over 7 per cent of GDP, and dollar reserves have dropped to less than a month’s imports-something like India’s situation in 1991. The fiscal deficit too is over 7 per cent of GDP, and the country’s credit rating is not far from default zone. Both the currency and the stock market have tanked. Growth has faltered, dropping to below 6 per cent in the year to June 2008. When seen against population growth of about 2 per cent, the income growth per head last year was only slightly more than a half of India’s. With the same lack of restraint that has marked his comments on Kashmiri militants and Sarah Palin, President Asif Ali Zardari has said that the country needs a $100 billion bail-out. That is a pipe-dream, given that Pakistan has so far failed to get any loans from friendly countries to pay for oil imports. A donor meeting scheduled for next month might deliver some cash, but that is still far from certain.

The question that Pakistan’s rulers must ask themselves is why the country is in such a mess, and what it should do to get out of the bind. Any such examination should make it clear that the country and its economy will benefit enormously from peace with its neighbours, open borders for mutually beneficial trade, and other policies that encourage international confidence, so that investible resources flow into the country. Jihad, cover for al Qaeda’s leaders and support for the Taliban are the last things that the country needs.
The fact is that Pakistan’s economy, about a fifth of India’s size 15 years ago, is now barely one-ninth of its bigger neighbour. The country is already boxing above its weight, and sustained under-performance on the economic front will further limit Pakistan’s military and diplomatic options when dealing with other countries — and also make it a less appealing country to the separatists in Jammu & Kashmir. The military’s response to this asymmetry, of indulging in low-grade warfare and a policy of ‘death by a thousand cuts’, has not worked despite the passage of nearly two decades, and will not work in the future.
Such realisations may or may not be behind President Zardari’s repeated affirmations in recent weeks of friendly intentions towards India, which he has rightly acknowledged as a status quo power, since it presents no threat to Pakistan. Indeed, the same realisations may have been responsible for President Musharraf’s abandoning of the old Pakistani policy of wanting to annex Jammu and Kashmir, as being simply unrealistic, and his search for more creative options. The question, though, is not what President Zardari thinks about these issues, but whether the larger Pakistani establishment (including, most importantly, the army) shares his perspectives. At the moment, Mr Zardari seems to be running ahead of the pack.