Pakistan - Domestic policy

After taking power, Musharraf faced a daunting array of domestic problems. These included a corrupt and inefficient political system, an enormous foreign debt, an economy on the verge of collapse, and a society with serious social problems (such as heroin-addiction) and riddled by sectarian violence and feuding political factions.

Musharraf favors moderate economic reforms. In a key policy speech on 15 December 1999, he outlined an ambitious program to deal with the troubled economy. Most of his measures focused on improved revenue collection. He created the National Accountability Bureau to pursue tax evaders, and his administration has issued ultimatums to defaulters on loans issued by government banks. He also increased benefits for disadvantaged Pakistanis, such as increasing compensation given to relatives of dead government employees, making government land available to landless peasants, and deferring electricity payments for agricultural users. However, while all of these are positive steps, they fall far short of the rebuilding of institutions and the economic infrastructure that seem warranted by Pakistan's economic situation. Such reforms can only be instituted over the long term and with substantial foreign aid and international support.

After throwing his support behind the U.S. war in Afghanistan, Musharraf cracked down on domestic Islamic extremist parties in Pakistan. He banned two of the most radical such groups and arrested hundreds of activists. While such heavy-handed political oppression normally attracts international protests, Western governments applauded the moves as long overdue, as did Pakistan's historic enemy, India. Many moderate middle-class Pakistanis also saw the moves as positive, as they felt increasingly marginalized by a country that has for years been sliding into Islamic radicalism.