Economic pessimism prevails in Pakistan
USA Today
By Paul Wiseman and Zafar M. Sheikh

KARACHI, Pakistan — Idrees Khan feels sorry for his customers when he totals their bills at his general store in this sprawling port city. He knows they can’t afford rocketing prices for staples such as wheat, rice and vegetable oil.

“Every day, I face the agony of the people when they come to my shop to buy food,” says Khan, 54. “So many people — especially poor people — can’t eat three times a day. They eat once a day. The government does not seem interested in doing anything to help them.”

Such worries are common in Pakistan even though, by some traditional measures, the country’s economy appears to be booming.

An influx of foreign aid and investment from the United States and elsewhere has primarily benefited the rich, while many in the poor and middle classes say their standard of living is getting worse.

Pakistan has many problems: political turmoil after last month’s assassination of opposition leader Benazir Bhutto, a Taliban insurgency along the Afghan border and rampant corruption. Yet economic concerns will be the biggest issue as Pakistanis prepare to elect a parliament Feb. 18, according to a poll last month by the International Republican Institute.

The non-partisan U.S. group said in a statement that this was the first time its polling in Pakistan found “that the number of economic pessimists so greatly exceeded the number of economic optimists.” According to the poll:

*51% said their personal economic situation had deteriorated over the past year, while 25% reported improvement.

*53% said inflation was the No. 1 issue they would consider when voting, 15% said unemployment, and 9% said poverty. Six percent cited terrorism, 3% corruption and 2% democratic change.

*33% said they expected economic conditions to get worse over the next year, although 26% expected improvement.

Ordinary Pakistanis don’t sound confident the election will bring any relief. Bhutto’s populist Pakistan Peoples Party has campaigned on assisting the needy.

“The poor people had hope about Benazir,” Khan says. “Since she was killed, their hope has died.”

Karachi driver Irshad Anwar, 38, has started working 12- and 16-hour days to bring in more money, and for the first time, his wife has had to find a job. “Life is more difficult than ever,” he says.

Getting rich quick
Looking at Pakistan’s recent economic record, the misery on the streets seems hard to explain.

Under pro-U.S. President Pervez Musharraf, annual economic growth has averaged more than 7% the past five years. Pakistan’s stock market soared 40% in 2007. Foreign investment — especially in telecommunications and banking — has been pouring into the country, surging 46% to $5.1 billion in the year that ended last June.

Nouveau-riche bankers, stockbrokers and computer technicians tool around in new cars, enjoy expensive dinners, buy lavish houses and travel abroad. Mercedes sales rose steadily 10%-15% a year from 2002 to 2006.

After relying on diplomats, expatriate executives and traditionally wealthy families, “there is a new category of customer: people who became rich quickly,” says Naseem Shaikh, director of the firm that distributes Mercedes cars in Pakistan.

Many economists give Musharraf and his economic team — led until recently by former prime minister and Citibank executive Shaukat Aziz — high marks for their economic policies. Musharraf’s government lowered trade barriers, improved tax collection, sold off state assets and encouraged foreign investment. “They’ve done a tremendous job,” says Maheen Rahman, head of research at the Karachi investment firm BMA Capital.

But Pakistan’s working class isn’t sharing in the bounty.

Sakib Sherani, chief economist at ABN Amro Bank Pakistan, says he has seen the same story before: Whenever Pakistan snuggles up to the United States — as it did after the Sept. 11, 2001, terrorist attacks — it enjoys a windfall of aid that props up economic numbers and enriches Pakistani elites without doing much for average citizens.

Since Musharraf enlisted in the U.S. war on terrorism, Pakistan has received more than $10 billion in aid, most of it going to the country’s powerful military.

“You don’t get much trickle-down from an F-16,” says Husain Haqqani, a former Bhutto adviser who is director of Boston University’s Center for International Relations.

“The economy is growing?” asks Aslam Magsi, 40, a farmer in the rural community of Tando Jam outside Karachi. “Only for the army and the establishment.”

More pressures
Political uncertainty also takes an increased toll. The stock market ended 2007 with a thud after Bhutto’s death, though it had a strong year overall. Mercedes sales dropped 20% last year. “This year is going to be worse,” Shaikh says.

He expects consumers to hunker down until they see whether Pakistan can get safely through an election. The campaign has been marred by violence, including a bombing in October that killed more than 140 of Bhutto’s supporters, her assassination Dec. 27 and a wave of deadly rioting that followed her death.

Even before the latest violence, the Asian Development Bank expected growth to slow to 6.5% this year from a forecast 7% in 2007.

Rahman says the government can’t do much about many of the economic pressures squeezing ordinary people. Surging food prices are a worldwide phenomenon — a result of things such as an Australian drought that cut the worldwide wheat supply and raised prices.

Sherani of ABN Amro agrees that many of the immediate economic problems are beyond the government’s control, but he says the government should take other steps — such as directing more spending to education and health care — that would help poor and middle-class Pakistanis and give them something they’re missing: hope.

“Our regular life has become miserable,” says Karachi housewife Gulnaz Bano, 33. “We don’t know where to go or what to do.”

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