Pakistan

Politics:

• Analysis

  Pakistan politics: Hollow milestone

  Election time in Pakistan: Hollow milestone

  A democratic government completes a full term, to little applause

  JUST weeks before an historic election, President Asif Ali Zardari, head of the ruling Pakistan Peoples Party (PPP), blithely moved into a mansion in Lahore built especially for him. With sprawling grounds, a reportedly bomb-proof design, a helipad and a huge swimming pool in the basement, the building is fit more for playboy parties than for affairs of state.

  The palace seems to sum up the arrogance and greed that has marked Mr Zardari's time in office. His party has not bothered to explain how it was acquired. It stands in a development built by a property tycoon with a reputation for gaining influential friends. The president's spokesman insists it was paid for by "the Zardari family" but provides no details.

  The election, which Mr Zardari announced on March 20th, is scheduled for May 11th. It is historic because it will mark the first time that a democratic government in a country prone to military coups has completed its five-year term, to be succeeded (almost certainly) by another elected government. That ought to be cause for celebration in a country where the army has so often stepped in to halt experiments in democracy. Yet the mismanagement and naked moneymaking under Mr Zardari have been such that this political milestone gets few cheers from Pakistanis.

  Mr Zardari and the PPP came to power in 2008 on a wave of sympathy and hope that brought an end to Pakistan's most recent period of military rule. During the election campaign, an Islamist suicide-bomber killed the PPP's then leader, Benazir Bhutto. Her husband, Mr Zardari, never popular, became head of the party. He inherited a mess, which he proceeded only to make worse. Economic growth slumped and inflation rose, punishing poor Pakistanis. Chronic power shortages were not dealt with.

  Meanwhile, the armed forces kept tight control of security and foreign policy, which a clownish government had no hopes of wresting from them. This left the army free to play jihadist games, favouring some militant groups while fighting others. Terrorism grew into a monster, turning most recently on the country's minority Shia population. The Pakistani Taliban retained a grip on territory running along the border with Afghanistan. Swat, a pretty, mountainous area in north-west Pakistan, was won back from the head-chopping insurgents in 2009, but this remains Pakistan's sole achievement in dealing with violent extremism.

  Karachi, Pakistan's main port and its economic heart, has turned into a killing zone, with on average a dozen bullet-ridden corpses turning up every day, victims of a relentless turf war among politically connected gangs. The PPP has fought on the streets of Karachi with two other political parties, the Awami National Party and the Muttahida Quami Movement, even as it has sat merrily in coalition government with them in Islamabad, the capital.

  As a political operator, Mr Zardari has proved deft. His liberal-leaning party had just over a third of the seats in Parliament, yet his dealmaking kept the coalition together. Some worthy constitutional amendments devolved power, and Mr Zardari gave up the few remaining formal powers of the presidency. Yet the country was run by the prime minister only on paper; in fact, Mr Zardari stayed in charge.

  Although his administration showed little interest in delivering services, it was consumed by a fight over the levers of power with two other institutions of state: the armed forces and the judiciary, which was newly independent and emboldened. The fact that the government completed its term owes much to the restraint shown by the main opposition leader, Nawaz Sharif, who was wary of playing into the hands of the armed forces, as he did when he was prime minister in the 1990s.

  Opinion polls now put the conservative Mr Sharif well ahead of the PPP. His party looks likely to be the biggest after the May election. But almost certainly it will need to find coalition partners, especially from areas outside its Punjab heartland. With a first-past-the-post electoral system, and regional factors driving politics, Mr Sharif will not romp into office. And he will certainly find daunting challenges if he gets there.

  March 23, 2013

• Background

  Pakistan: Political forces at a glance

  Present government: The Pakistan People's Party (PPP), which secured the most seats in the election to the National Assembly (the lower house of the federal parliament) in February 2008, leads a coalition government. Coalition management has become increasingly important. In 2011 the Muttahida Qaumi Movement (MQM) quit the ruling coalition, rejoined, and quit again. The PPP has secured a parliamentary majority by gaining the support of the Pakistan Muslim League (Q) or PML (Q), the party that supported the former military ruler who later became the country's civilian president, Pervez Musharraf. In the past year the role of the president (currently Asif Ali Zardari, the widower of Benazir Bhutto, a former prime minister and previous leader of the PPP who was assassinated in December 2007) has become increasingly marginal. The president is chosen by an electoral college of the Senate (the upper house) and the lower house, as well as by the four provincial parliaments. The prime minister, currently Raja Pervez Ashraf, is responsible for most day-to-day decisions, but the military is formally in charge of national security and informally dominates the country's most important foreign policy relationships (those with the US, Afghanistan and India). Provincial governments play an important role; Pakistan's most populous province, Punjab, is ruled by the Pakistan Muslim League (Nawaz), or PML (N), which sits in opposition in the federal parliament.

  The army will continue to wield significant informal political power

  The chief of army staff, General Ashfaq Kayani, has been adamant about the need to remove the military from politics and to leave the day-to-day running of the country to the civilian government. Nevertheless, there was intense speculation in early 2012 that the military might try to oust the government. The government came under severe pressure from the army because of the fallout from the so-called Memogate scandal, which centred on a memo that allegedly sought US help in preventing a possible military coup in mid-2011. The allegations greatly increased tensions between the civilian government and the military. Despite the overt hostility, the Economist Intelligence Unit has maintained its belief that an outright military takeover is unlikely, largely because there are numerous reasons that the army would prefer not to usurp power directly. However, the military is responsible for tackling the paramount threat posed by Islamist militants (as well as for facing down the perceived existential threat emanating from India). The army therefore still wields considerable informal political power. Meanwhile, a range of Islamist militant groups continue to undermine stability and security within Pakistan.

  Parliamentary forces
  (no. of seats in the National Assembly won in recent general elections)
  	Oct 2002	Feb 2008
  Pakistan People's Party	17	121
  Pakistan Muslim League (Nawaz)	18	91
  Pakistan Muslim League (Quaid-i-Azam)	118	54
  Muttahida Qaumi Movement	17	25
  Independents (incl 12 from federally administered tribal areas)	17	18
  Awami National Party	-	13
  Muttahida Majlis-i-Amal	59	6
  Pakistan Muslim League (Functional)	5	5
  Parties with one member	7	2
  Pakistan People's Party (Sherpao)	2	1
  Pakistan People's Party Parliamentarians	63	-
  National Alliance	16	-
  Pakistan Muslim League (Junejo)	3	-
  Total	342	342
  Source: Election Commission of Pakistan.

  Download the numbers in Excel

  Next elections: Elections for the National Assembly are due by February 2013, and the next presidential election is due to take place in September 2013. An election for one-half of the seats in the Senate was held in March 2012; the next Senate election (also for one-half of the seats in the chamber) is due in March 2015.

  Download text file (csv format)

  July 27, 2012

• Structure

  Pakistan: Political structure

  Official name

  Islamic Republic of Pakistan

  Form of state

  Federal parliamentary democracy

  The executive

  Asif Ali Zardari was elected president in September 2008. The prime minister and head of government is Raja Pervez Ashraf, who was appointed to the post in June 2012

  National legislature

  The National Assembly (the lower house) has 342 seats, 272 of which are elected on a first-past-the-post basis. Of the remainder, 60 are reserved for women and ten for non-Muslim minorities; they are allocated, on the basis of proportional representation, to parties that win more than 5% of the directly elected seats. The Senate (the upper house) has 100 members. Of these, 22 are elected by each of the four provincial assemblies, eight are tribal representatives and four are representatives from the lower house

  National elections

  National Assembly: February 2008. The next National Assembly election is expected to be held in May 2013. President: September 2008. The next presidential contest is due to take place in September 2013. Senate: an election for one-half of the seats in the chamber was held in March 2012. The next Senate election (also for one-half of the seats) is due in March 2015

  National government

  The Pakistan People's Party (PPP) and the Pakistan Muslim League (Nawaz), or PML (N)—the two parties that won the largest numbers of seats in the National Assembly election in 2008—led a coalition government until August of that year, when the PML (N) left the coalition. From May 2011 the government consisted of a coalition led by the PPP and including the Pakistan Muslim League (Quaid-i-Azam), or PML (Q), and the Muttahida Qaumi Movement (MQM). The MQM then left the government in June 2011, but rejoined it in October that year

  Provincial government

  Elections for Pakistan's four provincial assemblies were held in 2008 alongside the National Assembly election. The provinces enjoy considerable autonomy, and this has caused tensions with the central government

  Main political organisations

  PPP; PML (N); PML (Q); Muttahida Majlis-i-Amal (MMA, which comprises six religious parties, including Jamaat-i-Islami and Jamiat-i-Ulema-i-Islami); MQM; National Alliance (comprising several small parties led by the Millat Party); Awami National Party; Pakistan Tehreek-e-Insaaf; Jiye Sindh Qaumi Mahaz

  Key ministers

  President: Asif Ali Zardari

  Prime minister: Raja Pervez Ashraf

  Commerce: Makhdoom Amin Fahim

  Defence: Chaudhry Ahmed Mukhtar

  Finance: Saleem H Mandviwalla

  Foreign affairs: Hina Rabbani Khar

  Industries & production: Manzoor Ahmed Wattoo

  Information & broadcasting: Firdous Ashiq Awan

  Interior: Rehman Malik

  Investment: Saleem Mandviwalla

  Labour & manpower: Khurshid Ahmed Shah

  Law, justice & parliamentary affairs: Babar Awan

  Privatisation: Naveed Qamar

  Central bank governor

  Yasin Anwar

  March 12, 2013

• Outlook

  Pakistan: Key developments

  Outlook for 2013-17

  • The government has said that the next general election will be held in May 2013. Following the poll, Pakistan is set to experience the first transfer of power between civilian governments in its 66-year history.
  • A government with a popular mandate from mid-2013 will improve political stability, although the political situation will remain volatile in 2014-17.
  • The US will remain an important source of military and civil aid to Pakistan. However, following the withdrawal of foreign troops from Afghanistan in 2014, aid flows are likely to decline.
  • The government will continue to miss its stated targets for fiscal consolidation in the short term. The budget deficit is forecast to narrow only slightly in fiscal year 2012/13 (July-June), to the equivalent of 6.4% of GDP.
  • The precarious state of the public finances and the country's weak external position mean that Pakistan will require assistance from the IMF (which will come with strict conditions attached) to avoid a balance-of-payments crisis.
  • Real GDP growth will remain lacklustre in 2012/13-2016/17, averaging 3.7% a year. Economic expansion will be constrained by the poor domestic security situation, structural imbalances and continuing electricity shortages.

  Review

  • A large-scale bombing on February 16th targeted the ethnic-Hazara Shia community in Balochistan province. On March 3rd another attack targeted a Shia mosque in Karachi, signalling a broadening of sectarian violence.
  • In a blow to the opposition movement headed by a firebrand Sufi cleric, Tahir ul-Qadri, his petition to have the current line-up of the Election Commission replaced was dismissed by the Supreme Court on February 13th.
  • In mid-February the government announced that it had signed a contract to begin construction on the Pakistan leg of an Iran-Pakistan gas pipeline, promptly earning a rebuke from the US administration.
  • The Pakistan rupee fell to a record low against the US dollar in February as the government made further repayments to the IMF. Principal repayments to the Fund are expected to total US$3.1bn in 2013 and US$2bn in 2014.
  • Over the course of February the state-owned oil marketing company, Pakistan State Oil, issued repeated warnings that it was close to default as its debtors failed to make payments for purchases of oil.
  • The headline rate of consumer price inflation slowed in February, to 7.4% year on year, following two consecutive months of accelerating price rises.

  March 12, 2013

Economy:

• Background

  Pakistan: Country fact sheet

  Fact sheet

  Annual data	2012a	Historical averages (%)	2008-12
  Population (m)	180.1	Population growth	1.8
  GDP (US$ bn; market exchange rate)	231.2b	Real GDP growth	3.2
  GDP (US$ bn; purchasing power parity)	516.0	Real domestic demand growth	3.4
  GDP per head (US$; market exchange rate)	1,284	Inflation	13.2
  GDP per head (US$; purchasing power parity)	2,865	Current-account balance (% of GDP)	-2.9
  Exchange rate (av) PRs:US$	93.4b	FDI inflows (% of GDP)	1.4
  a The Economist Intelligence Unit estimates. b Actual.

  Download the numbers in Excel

  Background: The Islamic Republic of Pakistan was founded in 1947. East Pakistan (now Bangladesh) seceded in 1971. Since independence there have been several military coups. The last was in 1999, when the chief of army staff, Pervez Musharraf, became the chief executive of Pakistan. In 2001 he became the country's president, and parliament re-elected him in October 2007. Mr Musharraf resigned as army chief in November 2007 and stood down as president in August 2008. The general election that took place in February 2008 resulted in a new coalition government led by the Pakistan People's Party and the Pakistan Muslim League (Nawaz); the latter party withdrew from the government in August 2008.

  Political structure: After a series of constitutional alterations in recent years that increased the powers of the president at the expense of parliament and the prime minister, parliamentary supremacy was restored in 2010 when both houses of the legislature approved a landmark constitutional amendment that reversed the changes of the previous few years. The National Assembly (the lower house of parliament) was elected in February 2008 for a five-year term. Provinces are represented in the National Assembly in proportion to the size of their populations. An election to the Senate (the upper house), in which the four provinces have equal representation, was held in March 2012. Senators serve terms of six years, and one-half of the seats in the upper house come up for re-election every three years. The next general election is due to be held in May 2013.

  Policy issues: Mr Musharraf oversaw the gradual liberalisation of the economy, but political instability, civil unrest and the threat of terrorist violence have damaged the business operating environment since 2008. The government will need to reassure foreign investors and promote growth in foreign investment inflows. Long-term economic stability will depend on speeding up the privatisation programme, achieving growth in exports and maintaining official inflows of remittances. In the early part of the forecast period policy will focus on reducing the fiscal deficit and taming inflation.

  Taxation: The highest income tax rate stands at 25% and the lowest at 0.25%. The corporate tax rate is a uniform 35%. Non-residents are exempt from tax on income earned from stocks and government securities.

  Foreign trade: Merchandise exports (fob) stood at US$24.6bn in 2012, while imports (fob) totalled US$39.9bn in that year, resulting in a trade deficit of US$15.3bn.

  Major exports 2012a	% of total	Major imports 2012a	% of total
  Cotton cloth	5.8	Petroleum products	39.3
  Knitwear	4.6	Crude petroleum	19.9
  Rice	4.3	Palm oil	8.6
  Cotton yarn	4.2	Telecommunications	3.8
  Leading markets 2011b	% of total	Leading suppliers 2011b	% of total
  US	8.3	China	36.8
  UAE	4.4	Saudi Arabia	23.0
  Afghanistan	4.4	UAE	22.8
  China	4.4	Kuwait	11.9
  a State Bank of Pakistan. b IMF.

  Download the numbers in Excel

  Download text file (csv format)

  March 13, 2013

• Structure

  Pakistan: Economic structure

  Data and charts: Annual trends charts

  
  

  

  March 12, 2013

• Outlook

  Pakistan: Country outlook

  Pakistan: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: In recent years Pakistan's civilian executive has been competing for influence with the country's powerful military and its increasingly assertive judges, thereby setting the stage for growing political conflict. The National Assembly (the lower house of parliament) will complete its five-year term on March 16th, a rare achievement in Pakistan. The government has announced that the next general election will be held in May. Following the poll, the country is set to experience the first transfer of power between elected, civilian governments in its 66-year history.

  ELECTION WATCH: The government has announced that the next general election will be held in May 2013. Meanwhile, campaigning has already begun. The main opposition Pakistan Muslim League (Nawaz) hopes that the poll will be seen as a referendum on the feckless PPP-led administration. A third force, in the form of a populist campaign led by a charismatic former national cricket captain, Imran Khan, is gaining popularity, although Mr Khan's ability to translate his popularity into electoral success has yet to be tested.

  INTERNATIONAL RELATIONS: Against the background of the impending withdrawal of US and NATO troops from Afghanistan in 2014, Pakistan's importance to the maintenance of regional stability will rise. The US will remain an important source of military and civil aid to the country. However, following the withdrawal of foreign troops from the region, aid flows are likely to diminish. The idea of a broad strategic partnership has been undermined in recent years by concerns regarding the Pakistani government's willingness and capacity to combat Islamic terrorism, particularly following the discovery and killing of the al-Qaida leader, Osama bin Laden, by US special forces in Pakistan in 2011. The Economist Intelligence Unit forecasts that aid from Western governments will increasingly be conditional on the Pakistani administration's efforts to tackle terrorism. In this context, Pakistan will welcome further offers of investment and aid from China, a relatively uncritical ally.

  POLICY TRENDS: Pakistan entered into a US$11bn Standby Arrangement with the IMF in November 2008 to support its balance of payments. The three-year programme was terminated early, in September 2011, with only US$7.5bn having been disbursed and the Fund criticising Pakistan's administration for failing to reduce its budget deficit. Pakistan began paying down the loan in 2012, when it repaid around US$2.1bn. Principal repayments to the Fund are expected to total US$3.1bn in 2013 and US$2bn in 2014, placing further strain on the public finances. The country's economic fundamentals remain weak, and it therefore looks increasingly likely that the government will need to negotiate a fresh lending programme with the IMF in the next 12 months.

  ECONOMIC GROWTH: Real GDP growth has been constrained by the volatile security environment, structural imbalances in the economy and ongoing electricity shortages. In fiscal years 2012/13-2016/17 (July-June) economic growth will remain lacklustre, averaging 3.7% a year. Private consumption, which now accounts for just under 90% of nominal GDP, will remain the primary driver of economic expansion in the forecast period. We expect expenditure on investment to contract for the fifth consecutive year in 2012/13. Investment spending as a proportion of nominal GDP has almost halved in the past five years, from 20.5% in 2007/08 to 10.9% in 2011/12, owing to tightness in local credit markets and a lack of foreign financing (exacerbated by both the global economic slowdown and the poor domestic security situation). Government consumption growth, which reached 8.2% in 2011/12, will accelerate to 9% in 2012/13 as the government continues to spend liberally in the run-up to the general election. We expect a sorely needed programme of fiscal consolidation to commence following the poll, most likely linked to a new IMF assistance package.

  INFLATION: Despite the pick-up in inflation in December and January, the average annual pace of price increases has moderated in the past nine months, helped by a deceleration in food price inflation. Nevertheless, the wide fiscal deficit, the weakness of the Pakistan rupee and entrenched inflationary expectations will continue to generate underlying price pressures in 2013-17. Meanwhile, the government, which has pledged to keep net borrowing from the State Bank of Pakistan (the central bank) at zero, continues to borrow extensively from local banks to finance its deficit. We expect global food prices to fall by an average of 4.8% a year in 2013-14 and the rate of consumer price inflation in Pakistan will thus slow in that period, before accelerating again in line with a rise in global prices for food and fuel. Overall, we expect consumer price inflation to average 7.7% a year in 2013-17. However, a failure to undertake fiscal consolidation, a renewed surge in global oil and food prices, or inclement weather that reduces domestic agricultural output in any given year could cause inflation to exceed our forecast.

  EXCHANGE RATES: In the forecast period a number of factors will exert further downward pressure on the Pakistan rupee, which depreciated by 7.6% against the US dollar in 2012. These influences include greater demand for US dollars (stemming from the need to pay for oil imports), the necessity of making debt repayments, persistently high inflation, weak economic growth, the large fiscal deficit and falling inflows of foreign funds. We therefore expect the local currency to depreciate against the US dollar by 2.2% a year in the forecast period and to average PRs104.7:US$1 in 2017.

  EXTERNAL SECTOR: Merchandise export revenue growth will rebound to an average of 11% a year in 2013-17, having contracted by 6.4% in 2012. Export expansion will be driven by the depreciation of the Pakistan rupee (which makes the country's exports more competitive) and a gradual global economic recovery. Import growth, which slowed to 2.5% in 2012 owing to the weakness of the local currency and a continued fall in investment spending, will average 11.1% a year in 2013-17.

  March 06, 2013

• Forecast

  Pakistan: Country forecast summary

  Country forecast overview: Highlights

  • The government has said that the next general election will be held in May 2013. Following the poll, Pakistan is set to experience the first transfer of power between civilian administrations in its 66-year history. The assumption of power by a government with a popular mandate after the election will improve political stability in 2014-17. However, jostling for influence among Pakistan's various power centres will remain a source of volatility in the forecast period, as will the growing spectre of sectarian violence against minorities.
  • Against the background of the impending withdrawal of US and NATO troops from Afghanistan in 2014, Pakistan's importance in maintaining stability in the region will rise. The US will remain an important source of military and civil aid to Pakistan. However, following the withdrawal of foreign troops from the region, aid flows are likely to decline. Relations with India will remain broadly stable, with no widespread outbreak of hostilities, but no significant breakthroughs either.
  • Fiscal consolidation, which is urgently needed to improve macroeconomic stability, is unlikely to occur until after the coming election. Taming inflation and implementing structural reforms to support economic growth will remain policy priorities, at least on paper, although poor governmental effectiveness will hamper progress on these fronts.
  • GDP growth has been constrained by the volatile security environment, structural imbalances in the economy and an ongoing electricity shortage. The Economist Intelligence Unit forecasts that growth will remain lacklustre in fiscal years 2012/13-2016/17 (July-June), averaging 3.7% a year. Private consumption, which now accounts for just under 90% of nominal GDP, will remain the primary driver of economic expansion in the forecast period.
  • Foreign-exchange reserves have declined since June 2011, reaching US$10.2bn at end-2012, down from US$14.5bn a year earlier. In addition to the growing trade deficit, debt repayments to the IMF have taken their toll on Pakistan's external position. Principal repayments to the Fund are expected to total US$3.1bn in 2013, and the situation thus appears precarious.
  • Our central forecast is that the government will secure a fresh assistance package from the IMF, in the form of a renegotiated repayment schedule and, potentially, a new lending programme. Without such an arrangement, a balance-of-payments crisis is likely in the next 12-18 months.

  Country forecast overview: Key indicators

  Key indicators	2012	2013	2014	2015	2016	2017
  Real GDP growth (%; fiscal years ending Jun 30th)	4.2	3.4	4.1	3.2	4.1	3.5
  Consumer price inflation (av; %)	9.7	7.2	5.2	7.6	9.5	9.1
  Budget balance (% of GDP; fiscal years ending Jun 30th)	-6.6	-6.4	-5.6	-5.4	-5.1	-5.0
  Current-account balance (% of GDP)	-0.9	-1.4	-1.4	-1.8	-2.1	-2.2
  Short-term interest rate (av; %)	10.5	8.1	7.3	7.7	8.6	10.0
  Exchange rate PRs:US$ (av)	93.4	98.0	98.0	99.9	102.0	104.7
  Exchange rate PRs:¥100 (av)	116.7	105.7	103.7	103.8	104.6	108.5

  Download the numbers in Excel

  Download text file (csv format)

  March 13, 2013

View detailed map

Country Briefing

Land area

769,095 sq km

Population

176.8m (2011; IMF estimate)

Main towns

Population in millions (Ministry of Finance, 2009/10 Economic Survey):

 Karachi: 13.4

 Lahore: 7.2

 Faisalabad: 2.9

Climate

Subtropical, cold in highlands

Weather in Karachi

Hottest month, June, 28-34°C (average daily minimum and maximum); coldest month, January, 13-25°C; driest month, October, 1 mm average monthly rainfall; wettest month, July, 81 mm average rainfall

Languages

Urdu is the national language. English is widespread in business circles and as a second language

Measures

Imperial system, changing to metric. Local measures include 1 seer = 0.933 kg; 1 maund = 40 seers = 37.32 kg

Numbers are still commonly expressed in crores and lakhs: 1 crore = 10m, written 1,00,00,000; 1 lakh = 100,000, written 1,00,000, although in 1978 the internationally accepted system of millions, billions and so on was introduced

Currency

Pakistan rupee (PRs); PRs1 = 100 paisa. Average exchange rate in 2011: PRs86.3:US$1

Time

5 hours ahead of GMT

Fiscal year

July 1st-June 30th

Public holidays

January 24th (Eid-i-Milad-un-Nabi); March 23rd (Pakistan Day); May 1st (Labour Day); August 8th-10th (Eid al-Fitr); August 14th (Independence Day); October 15th-16th (Eid al-Adha); November 9th (Allama Iqbal Day); November 14th (Ashura); December 25th (birth of Quaid-i-Azam). (Ashura, Eid-i-Milad-un-Nabi, Eid al-Fitr and Eid al-Adha are dependent on the Islamic lunar calendar, and their dates may therefore vary slightly from those listed)

January 04, 2013