Country Report Pakistan October 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.
• It is likely that the death of a militant Islamist leader, Baitullah Mehsud, will have only a limited impact in the long term on Pakistan's battle against terrorism.
• The US's policy on Pakistan and Afghanistan encompasses both military strikes on suspected Islamist militants and development assistance, but 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 reducing its deficit in fiscal year 2008/09 (July-June), but it plans to increase spending in 2009/10. The Economist Intelligence Unit thus forecasts the budget deficit at 5.1% of GDP in 2009/10.
• 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.
• We forecast that real GDP will expand by only 2.4% in 2009/10, compared with growth of 3.7% in 2008/09.

Monthly review

• On September 11th the government announced that it had arrested a prominent spokesman for Tehrik-i-Taliban Pakistan (TTP, the local offshoot of the militant fundamentalist Taliban movement), Muslim Khan.
• The government and the military have encouraged the creation of lashkars (village militias) to help to counter the threat posed by TTP and TTP-linked groups.
• At the end of September the SBP decided not to alter its benchmark interest rate, leaving it at 13%.
• In late September local media sources reported that that the prime minister, Yusuf Raza Gilani, had given power distributors permission to increase electricity tariffs by 6% from October.
• The Pakistani government and the World Bank have established a multi-donor trust fund that is intended to finance infrastructure projects in conflict-affected areas in north-western Pakistan.
• Pakistan is suffering from shortages of staple foodstuffs, such as sugar and wheat. This comes despite a record wheat harvest in 2009.

Source: Country Report

This report covers the following industry codes:
SIC Code: 49;47;1
NAICS Code: 22;48;11