Pakistan - Future trends

Pakistan's prospects for the immediate future are bleak. There is uncertainty as to the political future of the country; the supreme court legitimized General Musharraf's military coup of 12 October 1999 in the course of 2000, but also restricted the rule of the chief executive to 3 years. Nobody knows whether the country will return to democratic rule or whether this new phase of democracy will be equally dominated by the large landowners and characterized by widespread corruption as it was in the past. Observers warn that Pakistan's economic outlook and the extent to which its communities outside Punjab feel that they live in an unjust system could be the key determinant of the country's political future rather than the system of government it follows. The pending return of Benazir Bhutto, the former prime minister convicted of bribery and corruption, to Pakistan and possibly into politics further complicates the picture. The ongoing dispute with India over the province of Kashmir, where frequent ambushes have led to casualties and brought the 2 countries to the verge of nuclear confrontation, is unlikely to be resolved in the near future.

While Pakistan's military regime earns credit from Western economists for having a deeper commitment to reforms than previous rulers, many add that the pace of change is not fast enough. With a short-term mechanism in place to service the debt, the long-term challenge is to seek a significant increase in annual export income and large inputs of foreign inward investment. Another challenge to face is the public sector's poor performance. Public sector companies alone run a combined annual deficit equivalent to about 2 percent of GDP. The government promised to begin privatizing some large companies in 2001 and eventually sell some loss-making ones in an attempt to improve the risky state of public finances. It is vital for the country that it keeps the support of the IMF and other donors as it struggles to maintain payments. Improving tax collection in the medium-to long-term is crucial if Pakistan is to maintain repayments on its combined foreign and domestic debt of about US$62 billion, almost equivalent to Pakistan's annual GDP. It is estimated that the country needs at least US$21 billion of aid up to 2004 just for debt repayment, a large figure for a nation with annual exports of less than US$9 billion and reserves of below US$1 billion—sufficient to pay for about 5 weeks of imports.

Pakistan, it seems, has plans for reforms, but the success of its program will ultimately depend on how quickly and comprehensively it can deal with low social indicators, attract investors, and convince lenders that the future management of the economy will be different from the past.