Pakistan poll winner faces huge economic challenges

from The Financial Times..

May 8, 2013, By Victor Mallet in Lahore


Screen Shot 2013-05-09 at 12.19.19 PM“My son gives me 200 [Pakistani] rupees a day,” says Hassina, a 46-year-old mother of six, who is collecting spent lamp oil from Bibi Pak Daman, a famous Shia Muslim shrine, as a magical cure for her chest ailment. “Sometimes it’s enough to cook a meal with, and sometimes it’s not.”

In the back streets of Lahore, the talk these days is of poverty and power cuts – and the hope that Pakistan’s general election on Saturday will at last produce a government capable of reviving the economy and running fans and refrigerators, as well as factories, in the broiling heat of summer.

Whoever wins the election in this country of 180m will be faced immediately not only with the challenge of Islamist terror – Pakistan’s Taliban have killed hundreds of Shia Muslims and others it regards as apostates in the past year – but also with an economy crippled by a lack of electricity and a looming balance of payments crisis.

Screen Shot 2013-05-09 at 12.18.49 PM


The previous Pakistan People’s party government, which has stepped down ahead of the elections after running the country for the past five years, is dismissed by many voters and business leaders as particularly corrupt and inefficient even by Pakistan’s sorry standards of governance since partition from India in 1947.

In addition to debilitating power cuts, it has left the country in dire need of another rescue package from the International Monetary Fund, the negotiations for which will be one of the first tasks of the incoming administration.

Already the interim government in charge over the election period has embarked on initial discussions over a loan of $5bn-8bn to stave off a balance of payments crisis. According to the ADB, net liquid foreign reserves have fallen to $7.9bn, less than two months of imports, and will fall further next month when Pakistan repays $1.7bn it owes to the IMF for a previous loan.

“There is a serious risk of a balance of payments crisis unless the government can get help from the IMF,” Gareth Leather and Daniel Martin of Capital Economics wrote in a research note this week, warning of political instability and big structural problems for the economy. “We do not expect the situation to get better any time soon.”

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