Trouble in a rough neighbourhood

27 December 2007 By Martin Hutchinson

The former PM s assassination brings Pakistan closer to either authoritarian rule or bedlam, neither good for the country’s economy. A chaotic, impoverished, nucleararmed Pakistan of 165m people could be seriously disruptive to the world, both politically and economically.

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Benazir Bhutto, former prime minister (198890, 199396) and candidate of the Pakistan People's Party in the January 8 parliamentary elections, was assassinated Thursday. Former prime minister Nawaz Sharif (199093, 199799) has condemned the killing and remains in the election.

Pakistan has a population of 165m, growing at 1.8% per annum. It had a GDP of $124bn in 2006, growing at 6.6% in 2006 and an expected 5.9% in 2007. Its GDP per capita (purchasing power parity) was $2,600 and inflation was 8.4% in the year to September 2007.

Pakistan had a budget deficit of 4.1% of GDP on spending of 20% of GDP and a trade deficit of 4.2% of GDP in 2006. The country produces 20% of its oil requirements and all its natural gas. Pakistan ranked 142nd on Transparency International's 2006 Corruption Perceptions Index, above only Iraq, Cambodia, Bangladesh and Myanmar in Asia.

The Karachi 100 Index closed at 14,772 on December 27, up 47% in 2007. Pakistan creditdefault swaps soared to 505 basis points after the assassination from 405 basis points on Dec. 21, according to Phoenix Partners Group in New York.

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