July 1, 2012


Filed under: Uncategorized — sharafs @ 2:40 pm

The economic meltdown of Pakistan is a deliberate and methodical operation executed by Pakistan’s own policy makers in concert with State and Non State Actors. The political malaise rife with immorality flows out of this charter.

It is no coincidence that in the past two years, the war fronts in what USA calls AF-PAK have flipped. Slowly and gradually, Pakistan has been pushed to a corner; being accused as the spoiler. As NATO and US forces contemplate a symbolic withdrawal from Afghanistan, they will leave behind effective perpetual pivots of threat against presumed policies/targets in Pakistan. The credibility of this policy is based on a script of a discredited, ill organised and failing Pakistan; a direction we are headed and discussed/war gamed by Pakistan’s security establishment as early as 2002.

Why has Pakistan willingly made itself vulnerable and disadvantaged in an environment that offered fleeting opportunities? A nuclear country with abundant natural resources, manpower, sustainable economic indices succumbing to a melting point speaks volumes of the mindset and elastic conscience of its rulers; also a reflection of dysfunctionalism within.

In an essay titled From East India Company to West Pakistan Corporate in 2010, I had written, “Notwithstanding tactical military successes in FATA, Pakistan is ultimately positioned to loose on the larger canvas. A cohesive national policy needed to win such a conflict remains elusive. The government rather than strengthen and synergise other instruments of policy in tandem with military operations is hell-bent to reach an irretrievable position. As the anger of people grows to frustration, it will give way to violence, chaos and more militancy”. This is happening.


Pakistan’s rapid descent to anarchy is engineered by a coterie of corrupt and opportunist political parties adhering to different shades of ideologies conspicuously short on a unified national purpose, an interventionist and anti anarchic judiciary acting as a custodian of ‘rule of law’, an insurgency laced by urban terrorism, lack of federal and provincial writs, proliferation of alternate systems of arbitrations, shady Jirgas, poverty and rising waves of crime.  Was this the Pakistan envisioned by Asif Ali Zardari when he declared that ‘democracy is the best revenge’? Within the given script, he pursued the policies of a military dictator with vigour and craft.


Within a year the distinction on Salala as a JSOC Operation or a NATO/ISAF strike has blurred. This hybridist notion is not without a purpose; most explicit in seeking an exclusive apology from USA and severing the ground lines of communications (GLOC) for NATO (Blame Pakistan) and least explicit in why such denial from USA. Where is the relevance?


In the US perspective one major consideration seems to be the controlled attrition and demolition of Pakistan under ‘shaping the environment’ on a timeline. US support of Pakistan’s corrupt political elites through back room deals has ensured moral and fiscal bankruptcy. At the same time it engages select Pakistani scholars and opinion makers to create a breed of armchair liberals, critics, intellectuals and writers who untiringly praise the merits of the supremacy of democracy oblivious to the frightening drama unfolding within.


USA also calculates that pushing Pakistan army too far into Waziristan could be counterproductive and may bring more instability than planned.  According to Christine Fair, elements of Pakistan’s erstwhile jihadi proxies have refocused their efforts to sustain a bloody war on Pakistan itself. According to her, such disturbing mobilization should give pause to those who champion the causes of the “silent moderate majority” in Pakistan. This explains a veiled existential threat that non state actors pose to US adventurism into Pakistan and the reason why focus remains on Pakistan’s Jihadi nexus and Bombay bombing.


Consequently, USA could end up following a containment policy of Pakistan through economic manipulation, symbols of threat and outright coercion including limited Cold Start raids. It is expected that as Pakistan becomes weaker it will also become pliable. The ultimate mismanagement will unleash implosion, parochialism, division of the country and lead to international intervention. The issue of Punjab as a bastion of a strong army and Pakistani nukes would be settled for good. Pakistan’s geography could be redrawn. But laced within this simple narrative are dynamics that could explode the entire region and therefore the efficacy of working through proxies in Pakistan.


The government’s intransigence in not opening NATO land routes has relevance to the theory of uncontrolled demolition, which neither suits government nor USA. Knowing that in diplomacy, the secretaries and under secretaries draft and finalise agreements well in advance of the political ceremonies, this political bravery deflects all the effects of this stubbornness on the people and armed forces. Any haste may lead to a popular reaction within and upset the US scheme of sequential events in Pakistan focussed exclusively on the army and the nuclear capability.


The army actually feels convinced that USA has stabbed it more than once in the back and the times of GHQ-Pentagon romance are over. The container traffic has resulted in proliferation of US weapons and linkages with the ongoing insurgencies in Pakistan. Yet it has persisted with military diplomacy and kept communications open. According to Fair, the attainment of common strategic objectives in US-Pak relations has been overcast by divergence over security issues. With its hands full, the army is not keen to be sucked into any new conflict. It will wait and see how the dynamics within Pakistan shape themselves and choose working invisibly.


By choosing this option, pressure on Pakistan army is likely to increase through drones, sponsored militant activities particularly in Balochistan and posturing. Arrest of the Bombay mastermind, fresh offensives into Dir/Chitral from bases in North Afghanistan and presence of a US carrier off Gawadar are some of the implied threats. In case the issue of GLOCs cannot be resolved, raids into Pakistan will intensify. In a worst firebreak point, naval quarantine of Pakistan cannot be ruled out. Opening of a corridor through Balochistan alluded in my OPED titled Pakistan’s Future War could not be farfetched? This is how Pakistan’s Long War will be fought step by step.


Pakistan has reached a point where democracy as revenge is counterproductive. Every event is set to move in concert with US designs, unless the Supreme Court finally decides that the present dispensation is no more in the national interests of Pakistan; a question for Pakistan’s legal experts to ponder and liberals to rue.


Brigadier Samson Simon Sharaf is a retired officer of Pakistan Army and a Political Economist.




Filed under: Uncategorized — sharafs @ 2:37 pm
(Interplay of Economics and Politics: Part I)

Through the present budget the incumbent federal and provincial governments have ensured that by the year’s end, Pakistan’s economy will be on a ventilator. Rather than take bold decisions, they have chosen the Electoral Waltz ignoring that the streets could be full of chaos. They are performing the last rights over a patient who refuses to die.

The plummeting of Pakistan’s ecconomy is manipulated. The trigger to offset sustainability was set as early as 2000. Lest our memories fail, I am summarising some crucial decisions that have bled Pakistan to an economic catastrophe with explosive social implications and are pursued even today.

The water and power management coterie despite being the largest recipients of foreign loans till 2000 neither exercised vigilance nor showed efficiency. They wasted over 60% of allocations on fruitless feasibility studies and turned a blind eye to Indian developments and energy needs of the country. Slowly and steadily the stakes of IPP’s in the energy sector were allowed to eclipse the hydel and thermal potential.

By 2002, IPPs with tax exemptions had recovered investments and begun remitting profits, outsourcing costs and assuming the role of manipulators. Rather than cheap indigenous energy, Pakistan is now hostage to an expensive import based cartel that sells electricity in foreign exchange while consuming a sizable portion of Pakistan’s natural gas. The present government rather than make amends has aggravated the crises.

The downstream but most crucial industrial sectors have neither power nor gas. With the inability of the domestic industry to produce for local consumption and exports, cheap sub standard imports have replaced the local small scale industries creating unrest, poverty and layoffs. Having thoughtlessly lured 60 % of the country’s automobiles on gas, curbs have been imposed on supplies bringing a closure to the windfall of CNG stations. The new buzz is LPG.

The imposition of a classic VAT on the EU model was abandoned by CBR in 2000-1 in favour of an easy to collect indirect Sales Tax levy on the US Consumer Model. Rather than document the economy and harness irregular cash flows, this volte face jump started inflation and systematically forced the closure of irregular productive sectors. Now Pakistan is forced to live with this till a major turnaround in the economy cannot be made ans the scourge continues.

In 2000, Pakistan’s pioneering efforts in the canola edible oil and research were brought to an abrupt end by the ministry of industries to benefit the soya poultry lobby. Factories specialising in this field were locked up till extinction. The same ministry also eased restrictions on deletion programs of auto makers by allowing import of second hand cars. This crippled the local car industry that had successfully begun manufacturing international standard utility vehicles like Adam Revo and Korakoram. These factories are now junkyards.

The seizure of FCAs in 1997 had proved that a weak rupee was not a pre requisite to boost exports. Within three years the economy was on road to recovery. The government ignored the basic theory that a country in trade deficit must regard unexpected and non-fundamental appreciation of domestic currency as a boon to be used for cheaper imports and resetting of import priorities. Despite 13 Billion Dollars in the system and an appreciating rupee, the Central Bank ignored the lesson and took the fatal decision to devalue the national currency. Imports were now more expensive and exports did not grow appreciably. But it did not end here. Rupee is fast reaching its century against the US Dollar.

By 2003, with increased remittances, the State Bank soon ran out of the mopping up and sterilization capacity.  Every Rupee the Central bank dished into the market carried a return at that time of over 17% for the commercial banks while the dollars it got in return were earning less than 2%. This meant that budgetary resources were to be strained to meet the difference. Rather than address this issue, a windfall of Rs. 1 Trillion was left in the banking system to restore the parity of rupee to dollar at 2%, an equivalent of Pakistan’s entire National Savings from 1965 to 2001. The State Sector through issue of Government securities at market rates could have absorbed it, appreciated the rupee, discouraged import based consumerism sponsored by banks and hedged national savings. Lamentably, by 2003, Pakistan’s currency printers were in over drive and still are.  As of now, these windfalls are replaced by heavy government domestic borrowing bringing Pakistan on an economic precipice.

The rationale for privatisations was faulty and manipulative. A foreign state enterprise bought PTCL and still owes about 800 million dollars. Pakistan at one point had the resources to build more state enterprises rather than ridding itself of existing ones at throwaway prices. Good management could have been imported. Unfortunately, Pakistan’s large scale consumer sectors like communications and energy are now foreign controlled. The reversal of Pakistan Steel Mills was not taken in this spirit and conditions created to destroy it.

The government ignored that the agriculture sector through value addition was the major component of the GNP. In contrast high growth rates based on consumerism were propagated as a success story. The marketing strategy through limited intervention of imports of agricultural products had always stabilised domestic pricing and kept the pricing cartels in check.  Once these checks were removed in 2007, cartels proliferated. Repeatedly, agriculture imperialism made forays into the sector using dubious multi nationals but remains at bay due to market forces.

With 2007 elections in mind, the government remained reluctant to adjust fuel prices commensurate to the international rates. This exerted a huge pressure on the national exchequer. Belatedly, when the decision to raise fuel prices was finally taken, it triggered the circular debt issue. The cartels took their money and fled. A fortune was deliberately surrendered under the nose of an India centric security establishment and Pakistan plummeted into the biggest crisis of its history.

There are two explanations for this to have happened.

Pakistan’s elites and dirty rich have their money stacked in overseas accounts and solid Gold. Their currency of convenience is a dollar or euro.  Their only stakes in the system are political intrusions to ensure the status quo of neo colonialism.

Governments in Pakistan choose this path deliberately. The emphasis is on CONSUMPTION: not SELF-RELIANCE because this is where the ready cash exists and serves the neo imperialist masters.

To be continued……..

A note of thanks to Dr. Ashfaq, Dr. Zafar Altaf and Mr. Zahid an investment banker for their intellectual deliberations.

Brigadier Samson Simon Sharaf is a retired officer of Pakistan Army and a Political Economist. E Mail:

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