KARACHI Pakistan (AP) – Atiq-ur-Rahman dismisses the gusty northwesterly wind blowing past his tatty barber’s shop. It is an economic chill that troubles him and threatens to undermine the tigerish economy just as Pakistanis prepare to vote in general elections.
“I have weathered all kind of hardship in my life, so this cold weather is nothing,” said the 49-year-old, waiting glumly outside for customers in this often scorching port city. “But it pains me to see my children growing up when I cannot even feed them properly.”
Rahman, like many in this country of 160 million people, is being squeezed by inflation. The price hikes have included basics such as food and fuel.
They have coincided with shortages of flour, gas and power, causing problems for businesses as well as turning voters against President Pervez Musharraf’s political allies ahead of Monday’s parliamentary election.
The former army chief counts Pakistan’s sizzling economic expansion as his proudest achievement.
After seizing power in a coup in 1999, Musharraf’s government stabilized its own finances, drew on billions in American aid extended in return for help against al-Qaida, and attracted capital from foreign investors and Pakistani living abroad.
Economic growth has averaged close to 7 percent for five straight years, and reached 8.2 percent in 2005-06. The government recently trimmed its forecast for the current fiscal year, which ends in June, to between 6.5 percent and 7 percent.
Service sectors such as banking and telecoms have boomed thanks to privatization and deregulation. Agriculture and construction have strengthened.
The boom was built on cash sent home by Pakistani expatriates, privatization proceeds, foreign investment and cheap consumer credit, said Shahid Hasan Siddiqui of the Research Institute of Islamic Banking and Finance.
But there are complaints the gains have gone mainly to a narrow, already wealthy elite and done little to improve the country’s industrial base.
“It is a failure of policy that this could not be transformed into general welfare,” Siddiqui said.
The government’s consumer price index for January showed an almost 12 percent increase from the same month last year, driven by food and fuel. Rolling power cuts, even in the capital, Islamabad, have fueled perceptions that the expansion has brought little good.
The power crisis has disrupted production at thousands of factories, according to Zubair Motiwala, a leading industrialist tapped by the government to look for solutions.
“I don’t see any hope of any short term improvement, the situation is quite bleak,” Motiwala said.
Flour prices have shot up after the government overestimated last year’s wheat harvest and exported 500,000 tons. Smugglers and hoarders have profited.
According to an opinion poll released this week by the U.S.-funded International Republican Institute, more than half of the voters surveyed rated inflation as the hottest issue that will determine how they will vote in the elections.
Musharraf seems to be getting the blame. The poll also suggested a strong swing away from his supporters to moderate parties, especially that led by late leader Benazir Bhutto.
Bhutto’s assassination at an election rally on Dec. 27 also bodes ill for the economy. Riots in the wake of her death damaged businesses in Karachi, the country’s biggest city and commercial hub. Investor confidence is unlikely to be helped by warnings from the party of Bhutto and another ex-premier, Nawaz Sharif, of unrest if the election is rigged against them.
“There is fear in the (stock) market over what will emerge in the post election scenario,” said Ahsan Mehanti, chief financial officer of Shahzad Chamdia Securities, a brokerage house at Karachi Stock Exchange.
The benchmark KSE-100 index advanced 40 percent last year, but has eased back from a high set in October.
Foreign investors are currently holding back and share indexes could plunge if the election throws up a new government that clashes Musharraf.
Political paralysis would deepen the crisis triggered by the former army chief’s crackdown on the judiciary last year. Authorities are already grappling with a strengthening insurgency by militants linked to the Taliban and al-Qaida.
Addressing long-term economic difficulties such as making Pakistan’s key textile exporters more competitive and plugging a trade deficit fueled by the cost of importing oil and wheat will only become more difficult.Top