Strongman's weak heirs

18 August 2008 By Martin Hutchinson

Though it avoids the trauma of an impeachment, it may be further bad news for Pakistan s economy. The new government quarrels internally and is increasing taxes and handouts. Inflation has trebled and currency reserves have fallen. Its period of stable growth may be at an end.

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President Pervez Musharraf of Pakistan resigned August 18 after nine years in office, under threat of an impeachment resolution led by the current government.

Pakistan's inflation rate in July 2008 was 24.3% yearonyear, an alltime record. Its current account deficit was 9% of GDP in 200708; its budget deficit was 7% of GDP in 200708. Its GDP growth was 6.4% in 2007. Foreign exchange reserves have fallen from $16.49bn in October 2007 to $9.92bn on August 9.

The Karachi 100 stock market index has dropped 33% from its alltime high in April

In June, finance minister Syed Qamar in the government of Yousaf Raza Gilani, a coalition led by the Pakistan People's Party, claimed that Pakistan was worse off than 12 years ago. He reduced some food and fuel subsidies, but raised income and sales taxes, introduced a new handout scheme through the Benazir Card and made several favourable references to the policies of Zulfiqar Ali Bhutto, Pakistan's hardline socialist ruler from the 1970s.

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