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Cash-Strapped Pakistan Seeks Bailout

Violence on the rise as leaders scramble to hold off financial disaster

Pakistani women protest inflation
Pakistani women rally in Lahore on Friday, protesting an inflation rate that has reached 25 percent this month. (Photo credit: K. M. Chaudary / AP)

Oct. 17, 2008

ISLAMABAD, Pakistan — Pakistan’s new leaders are scrambling for foreign cash to ward off a possible economic meltdown at a time when they are trying to contain soaring violence by Islamic fundamentalists.

Battered by high inflation and a plunging currency, the nuclear-armed country hopes global powers and financial institutions will not want to see it further destabilized and hand over the dollars it needs.

But the plea for help comes as potential donors in the West are distracted by the global financial crisis and deepening fears of recession in their own economies. …

President Asif Ali Zardari returned Friday from neighboring China with a promise of assistance from an “all-weather friend,” but no specific public commitment.

Officials in search of funds

Pakistani finance officials have also visited Washington and Middle Eastern capitals in search of funds.

“Countries are busy with their own housekeeping, but they will not leave Pakistan in the middle of the road,” said Muzammil Aslam, chief economist at the Pakistani security firm KASB. “It is the world’s first line of defense against Taliban and al-Qaida.” …

Since 2001, the United States has given Pakistan around $10 billion in aid, most of it to the military to help it pay for operations against militants near the Afghan border. …

Through much of its history, Pakistan has struggled with chronic economic instability and foreign debt, but the current crisis comes at an especially dangerous time.

Rising violence

Militants sheltering along the border region with Afghanistan are blamed for the rising violence in that county as well as a string of bloody attacks at home. Osama bin Laden and other top al-Qaida leaders are thought to be hiding in the frontier region.

Last month, a suicide bomber struck the Marriott Hotel in Islamabad, killing 54 and leading the U.N. and foreign embassies to withdraw families of foreign staff.

Pakistan’s overwhelmingly poor population is already suffering from skyrocketing food and fuel prices and are enduring daily power cuts due to energy shortages.

Defaulting on its debt risks shattering any remaining local and foreign investor confidence in the battered economy as well as its government. It could escalate into an economic meltdown with out-of-control price increases, fewer jobs, more power shortages and a general breakdown in law and order in the country of 160 million people.

“Bankruptcy, should it happen, could unleash a massive tidal wave of social unrest,” the U.S.-based intelligence risk assessment agency Stratfor said in a report released Friday, “exactly what the jihadists on both sides of the Afghan-Pakistani border would like to see to advance their goals.”

Any outbreak of widespread social unrest brings with it the prospect of Pakistan’s armed forces being brought onto the streets and possible imposition of martial law in the country just months after former President Pervez Musharraf was ousted. …

Flows of foreign investment into the country’s once booming domestic economy that used to bridge the gap have dried up amid political instability and rising insecurity. …


Spending Surge Pushing Deficit Toward $1 Trillion

By Lori Montgomery and Dan Eggen
The Washington Post
Oct. 18, 2008

Congressional leaders and both presidential candidates are proposing billions of dollars in tax breaks and other measures to stoke economic growth, a surge in spending that could send the federal deficit soaring toward $1 trillion this year, creating the deepest well of red ink since the end of World War II.

The government already has embarked on an unprecedented spending spree to halt the implosion of the U.S. financial system and is borrowing money at levels that some economists fear could undermine the nation’s economic security for years to come. Congress could consider additional spending as soon as next month, potentially digging the nation’s hole even deeper. …

The numbers are adding up fast. Since President Bush signed an economic stimulus package in February, authorizing billions of dollars in rebates for American taxpayers, the government has pledged as much as $1.5 trillion to prop up the teetering economy. …

The Treasury Department so far has borrowed nearly $500 billion from pension plans, foreign governments and other investors to replenish the coffers of the Federal Reserve. Since the end of August, the national debt has jumped from $9.6 trillion to $10.3 trillion, with borrowing for the bank bailout yet to come.

Image: National Debt Clock
The National Debt Clock, shown on Oct. 9, 2008 in New York, has run out of digits. The “1” has been moved left to the space once occupied solely by the digital dollar sign. A non-digital, improvised dollar sign has been pasted next to the “1.” (Photo credit: Bebeto Matthews / AP file)

Meanwhile, the budget deficit — the annual difference between government spending and tax collections — has risen rapidly. It jumped from $162 billion last year to $455 billion in the fiscal year that ended in September, largely because of the cost of the stimulus package, as well as slowing tax revenues and rising expenses in Iraq and Afghanistan. …

2 Responses to “War on Terror Converges with Economic Meltdown”
  1. Immelman for Congress » Blog Archive » Tom Horner Townhall in St. Joe Says:

    […] After the Primary Election: Day 39 […]

  2. Immelman for Congress » Blog Archive » October 18, 2011 Says:

    […] War on Terror Converges with Economic Meltdown […]

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