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Double Your Trouble

By Matthew Yglesias

"Double Your Trouble"

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As you’ll recall, a few months ago when people cared a lot about foreign policy, people worried a lot about Pakistan. Seemed to be a country with a ton of problems, and many possible risks to the United States, and it was hard to see the clear way forward. But then came the financial crisis and people sort of stopped paying attention. But of course they have an economic crisis in Pakistan, too:

The Zardari government is sailing into a perfect storm of political instability and economic turmoil. The economy is in a virtual freefall. International agencies have slashed its credit ratings. The rupee has hit an all-time low against the dollar. Capital flight is believed to be continuing despite efforts to stop it. Suicide attacks and kidnappings have led to the repatriation of foreign skilled labor. The bourses are a blood bath as foreign investors continue to pull out. Unable to pay its bills, the government has taken to issuing I.O.U.s to private- and public-sector companies. Overall inflation is at a punishing 30-year high. Power shortages, the worst in at least 15 years, are disrupting businesses already hurt by higher input costs. To top it off, much-needed funding and easier terms promised by Pakistan’s allies and multilateral donor agencies have yet to materialize. Foreign-exchange reserves, worth about two months of imports, are fast running out—and with the worsening economic situation, so is public patience.

For its part, the Zardari-led coalition government, already besieged by political rivals and insurgent groups, has had to take unpopular measures to prop up the economy. It has raised taxes, upsetting the business community. It has trimmed government spending, prompting bureaucrats to grumble. It has increased tariffs on power, angering consumers and businesses already fed up with outages. And it has phased out subsidies on imported fuel, leading to price increases in everything from bus rides to cooking oil and prompting small, periodic protests. “Inflation accounts for most of the public disgruntlement,” says Mansoor Hussain, a columnist for the English-language Daily Times. “The popular expectation seems to be that the U.S. and world community will not allow Pakistan to fail and will foot our bills for what is still considered by us to be their war,” he told NEWSWEEK. But an oil deal with the Saudis is yet to come through, and substantive foreign-currency inflows remain elusive despite public commitments by allies, including the United States, which is facing its own economic crisis. Hoping to attract capital from various sheikhdoms, the government is dusting off a privatization program that has been stalled since the then chief justice overturned a steel-mills deal leading to his ouster.

Something to keep an eye on. Realistically, the U.S. is less likely than ever to make the sort of substantial commitment to Pakistani economic development that it seemed we needed in the recent past, even as that kind of commitment looks more necessary.

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