Pakistan Needs A Bailout


Written by Anya Hisam • Region • February 2009

President Asif Ali Zardari has asked an assistance of $100 billion to help put the Pakistani economy back on track. It is in the interest of the international community to assist this strategically located, nuclear-armed nation but is it listening.

Pakistan’s current account deficit ballooned to $2.57 billion in the first two months of the current financial year from $1.57 billion last year while its foreign currency reserves fell to $8.3 billion in the first week of October 2008, from $16.4 billion a year ago, as almost all sources of foreign capital inflows had either dried up or slowed down.

The niggling fear in Islamabad is that the country may find it difficult to meet its sovereign debt obligations in January and cover the widening current account gap unless it is able to raise over $10 billion over the next few months.

Hopes were pinned on firm pledges of cash support at the Abu Dhabi Friend of Pakistan meeting but it was clear that any commitments of aid or grant would not be forthcoming from the group any time soon. What Pakistan requires is investment in the energy, manufacturing, agricultural and other sectors to turn the economy around.

At such a conjuncture, citing the threat posed by militants along the Pakistan-Afghanistan border and the possible economic meltdown, President Asif Ali Zardari has asked the international community to give Pakistan $100 billion in grant to ensure the country’s survival.

“I need your help, if we fall, if we can’t do it, you can’t do it,” Mr Zardari told Wall Street Journal’s Brent Stephens when the latter interviewed him in New York in early October.

Stephens said President Zardari had a simple and powerful argument to make that the world could not allow the Pakistan government to fail – not when it was becoming increasingly plausible that Pakistan itself, with its stockpile of as many as 200 nuclear warheads, could be toppled by Al Qaeda and its allies.

In asking the international community for infusion of $100 billion into Pakistan’s economy, Mr. Zardari was keen to insist that it not be described as aid. He said he was looking for temporary relief for the country’s budgetary support and cash for the treasury which did not need to be spent but it would stop the outflow of the country’s capital.

Considering the soup that the Pakistani economy is in and the role that Pakistan has all along played as a frontline state in the war on terrorism, the Pakistani President is more than justified in asking for substantial financial support to shore up the country’s fast sinking financial fortunes. This is a great improvement on General Ziaul Haq’s famous ‘peanuts’ statement when Pakistan found itself in the position of a ‘frontline’ state following the Soviet invasion of Afghanistan. US President Jimmy Carter had on that occasion offered Pakistan a few hundred million dollars which Gen Zia dismissed as ‘peanuts’. The American government finally ended coughing up $ 3.2 billion in return for Pakistan’s assistance in the US war against the Soviets.

The aid money that Carter sanctioned may appear lowly but even by today’s standards, $ 100 billion is rather steep. In any event, Pakistani financial experts believe that an injection of some $ 10 to 15 billion would do the trick for the country.

President Zardari has, however, set a high price for Pakistan’s services because he feels that it is well-deserved.

Referring to reports that Pakistan has deployed F-16s against militants in tribal areas in part because the army’s own troops have been routinely routed in ground fighting, he said: “Their problems aren’t simply tactical. What kind of a joke is this that I cannot pay my security personnel more than the Talibs are paying?”

“Those terrorists are paying their soldiers 10,000 rupees; I’m paying seven or six thousand rupees,” he remarked.

It is commendable that at last a Pakistani leader has set a price for the services that the country continues to provide to a distant superpower in fighting the latter’s war. In the 1980s, Pakistan played an instrumental role in helping drive out the Soviets from Afghanistan and, in fact, setting in motion the break-up of the USSR. In return, besides the few billions in dollars it got, it was also gifted the Kalashnikov and drugs culture and millions of Afghan refugees.

This time around, thanks to 9/11, Pakistan has again become ensnared in a war on its western borders, with the price that it is paying being much bigger and much more serious. The country’s once tranquil northern belt is now a veritable war zone, suicide bomb attacks on innocent citizens across the land are the order of the day, Pakistan armed forces personnel are being martyred in the thousands and the country is fighting for its very survival.

Pakistan deserves a bailout – and the world must give the matter serious attention.