By Saeed Shah, McClatchy Newspapers
ISLAMABAD, Pakistan — A worsening economic crisis in
A Pakistani money-changer counts US dollars in Islamabad on October 8, 2008. Already nearly broke when the global financial crisis took hold, Pakistan now faces further woes that could take the nuclear-armed nation’s security situation closer to the edge, experts said.(AFP/File/Aamir Qureshi)
The crisis began early this year, as democracy was restored after more than eight years of . Now Pakistan’s have shrunk to $3.5 billion , and without an international rescue package, America’s key ally in the fight against al Qaida is likely to default on foreign debt repayments in the next two months, economic experts said.
Inflation is running at 25 percent, according to official figures, electricity is in short supply, and Pakistan’s currency, the rupee, has been devalued 25 percent against the dollar. Investor confidence has fallen so low that on Monday, police had to surround theto protect it from angry investors. The Exchange already had lobbied the government unsuccessfully to be allowed to close for two weeks.
Terrorist acts by Islamist insurgents have accelerated capital flight and discouraged foreign direct investment. Depositors are lined up at banks to withdraw their money or to send it abroad.
“The canvas of terrorism is expanding by the minute,” said interior minister under Pervez Musharraf , the U.S.-backed former president. “It’s not only ideological motivation. Put that together with economic deprivation and you have a ready-made force of Taliban , al Qaida , whatever you want to call them. You will see suicide bombers churned out by the hundred.”, a member of parliament and a former
“In Pakistan , there are a huge proportion of people just above the poverty line. A slight shock in their income can push them below the poverty line,” said Sadia Malik , director of the Human Development Center in Islamabad , the capital. “This is the kind of shock that would have pushed a huge number of people into the ,”
The prices of wheat, rice and milk have more than doubled in the last year. The price of flour used to make roti bread, the food staple, has jumped from 12 rupees ( 15 cents ) a kilo last year to 28 rupees ( 35 cents ). Economists warn that prices would spiral even higher if Pakistan defaulted on its foreign debt.
Before the crisis, an estimated that 56 million, around a third of the population, already were living below the poverty line….