Country Report Pakistan November 2009

Outlook for 2010-11

• National security will remain the most pressing issue on the domestic political agenda, but there is little chance that the battle against Islamist militancy will be won decisively in the medium term.
• Pakistan's leading politicians will continue to spar, despite the range and gravity of the challenges that the country is facing. The debate over whether and how to curtail the powers of the presidency remains unresolved.
• The US's policy on Pakistan and Afghanistan encompasses both military strikes on suspected Islamist militants and development assistance, but it will also seek co-operation and “accountability” from Pakistan.
• Pakistan's acceptance of emergency financing from the IMF means that it will lose a considerable degree of autonomy in the area of economic policy.
• The government made progress in narrowing its deficit in fiscal year 2008/09 (July-June), but it plans to increase spending in 2009/10. This means that the budget deficit will widen to 5.8% of GDP in 2009/10, from 5.2% in 2008/09.
• The State Bank of Pakistan (SBP, the central bank) is concerned about inflationary risks, and therefore will maintain its relatively tight monetary stance until the second quarter of 2010.
• The Economist Intelligence Unit forecasts that real GDP will expand by just 2.4% in 2009/10, compared with growth of 3.7% in 2008/09.

Monthly review

• On October 17th the army began an offensive in South Waziristan, the district in the Federally Administered Tribal Areas that is the stronghold of Tehrik-i-Taliban Pakistan (TTP, an alliance of militant Islamist groups).
• TTP launched a string of deadly terrorist attacks in early October, including a suicide bombing at the office of the UN's World Food Programme in the capital, Islamabad, and a siege at the army headquarters in Rawalpindi.
• The US president, Barack Obama, signed a new bill promising US$1.5bn in non-military aid every year for the next five years, over and above the US's ongoing military assistance to Pakistan, which totals more than US$1bn a year.
• The World Bank has criticised Pakistan for the slow pace of economic reform, noting that “vested interests” and “lack of political will” are responsible for resistance to change.
• In the SBP's latest annual report on the state of Pakistan's economy, it forecasts real GDP growth of 2.5%-3.5% in 2009/10. The central bank expects the agricultural sector to continue to support overall economic growth.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;89;1
NAICS Code: 52;81;11