2006 has been a good year in many ways for Pakistan under General Pervez Musharraf. The economy has continued to grow at over 6 per cent. The women of Pakistan who constitute half the nation have been greatly relieved by the Women’s Protection Bill. The minorities are freer today than at any time in the last three decades. Pakistan’s standing in the world community has risen. The press is vibrant and thriving. Sectarian violence and terrorism has diminished. The cultural environment is not as suffocating as before. Tensions with India have abated. And the promised general elections for 2007 seem on target.
But lingering problems and shortcomings persist. These could cast a shadow over 2007. Inflation remains a big worry for the urban middle classes. The mullahs are rampaging against the amendment to the Hudood Ordinance. The press has been selectively silenced from reporting on the political, legal and humanitarian crisis in Balochistan. The thaw with India is viewed with suspicion by hard-liners and ideologues who accuse the government of “selling out” on Kashmir. The jihadis are planning ways to sabotage the peace process. The relationship with America is coming under strain because of different perceptions and policies relating to Afghanistan. All these factors could weaken General Musharraf’s hand in 2007 and thereby destabilize the country.
Economy: FOR BETTER – Economic growth of over 6 per cent is based on rising tax revenues, increased aid flows, high foreign remittances, easy money policies, significant privatizations and buoyant trade. Banks, insurance and leasing companies, textiles, cement, automobiles, fertilizer and telecoms are boasting soaring growth rates and profits. Real estate developments are proliferating. Foreign bond floats are generating international confidence and international credit rating companies are notching up Pakistan’s standing in emerging markets. The regulatory environment is improving. The stock index remains impressive. FOR WORSE – Inflation is high. This hurts the urban middle classes and is cause for discontent. Interest rates are rising because the state bank is tightening money supply to control inflation. But this is a disincentive for investment. The trade deficit is threatening a balance of payments crisis because the surge in imports, due in part to the steep climb in the price of oil, is outstripping the growth in exports, which are still solely dependent on the textile sector. Foreign investment is largely confined to the privatization of profitable state owned units which will run out in a couple of years. Similarly, the spurt in the telecom sector which fulfilled a historic slack is bound to flatten out ahead. With flat remittances and reserves under pressure from the trade deficit, a gradual devaluation of the rupee cannot be ruled out, which means more inflationary pressure. A structural crisis between means and ends is looming over the horizon.
Politics: FOR BETTER – The political system is stable despite mounting threats from the opposition. General elections are on target next year. The government hasn’t backtracked from its commitment to conduct them under neutral caretaker governments and an independent election commission. The passing of the Women’s Protection Bill has raised the moral stature of the regime at home and abroad. The revision in the textbooks against notions of violent jihad and demonizing India and Hindus has been universally welcomed. The détente with India is people and business oriented. The decision to build the big dams to cater for energy shortages in the future is good. The federal and provincial governments are relatively competent and transparent and there are no major corruption scandals in the air. FOR WORSE – Despite exhorting the people to vote for the moderates, the government has still not clinched a working deal with the Peoples Party to enlarge the moderate basis of the national consensus required in support of current policies. The centre-provincial relation is on the rocks in Balochistan and the NWFP, with the former in the throes of a nationalist insurgency and the latter in the grip of Talibanism. As the incumbent, the PMLQ’s popularity is at its lowest ebb, raising the spectre of rigged elections, boycotts and instability in 2007. General Musharraf’s dogged refusal to doff his uniform is causing deep rumblings in the political system. Relations with Washington are on the verge of deterioration over America’s mounting troubles in Afghanistan that are ascribed to Pakistan’s reluctance to confront the Taliban in its areas. The social and political trend of increasing anti-Americanism and deepening religiosity in the country bodes ill both for domestic stability and international credibility.
Until now General Musharraf has demonstrated a remarkable ability for pragmatism in the face of rooted ideological beliefs and prejudices among the people and ruling establishment of Pakistan. The decision to about-turn after 9/11 has proved extremely beneficial to Pakistan. The war against Al-Qaeda even at great personal risk has brought rewards. India has been won over to a peace and security dialogue to change the status quo. And now the women of Pakistan have been liberated from the shackles of the Hudood Ordinances at considerable cost to the PMLQ. But the real challenge remains how to extend and institutionalize such beneficial developments in the next few years. If General Musharraf fails to do that next year, he will go down and take the system down with him.