Karachi grinds to a halt after fatal blasts
By Syed Fazl-e-Haider
KARACHI, Pakistan - Business in Karachi, Pakistan's commercial capital, ground
to a halt at the weekend after at least 33 people were killed and over 100
injured in two explosions on Friday. The city of 18 million people houses the
main stock exchange, central bank and offices of multinational corporations.
Businessmen warn that Karachi, which contributes about 70% of the country's tax
revenue, is fast becoming a "no-business and no-trade city", as there is no
protection to life and property.
Suicide bombings have surged across Pakistan since the army in October launched
an offensive against Taliban insurgents in the northwestern tribal areas. Their
impact and the cost of security is
drawing funds away from other areas of spending. Higher than expected
expenditure on security, power subsidies and cost overruns have already forced
the government to slash by 30% the overall size of its Public Sector
Development Program (PSDP) for the fiscal year that runs through to June 30.
The country is dependent on external flows to keep its fiscal deficit within a
target of 4.9% for the current fiscal year, yet trade activity has shrunk and
dragged small businessmen into a severe financial turmoil and critics say the
government has been least concerned with the problems of traders and common
businessmen in the financial capital.
Karachi on Saturday mourned the killings in the two blasts, with a transport
strike bringing the supply of essential commodities and trade to a halt.
"Only 25% of laborers could reach industrial units, as there was thin transport
on the city roads on Saturday," a Business Recorder report cited Saleem Parekh,
the chairman of the Karachi-based Sindh Industrial and Trading Estates
Association of Industry, as saying. "Production plummeted between 15% and 20%."
Trading activity plunged by more than 50% on Saturday at the country's largest
fruit and vegetable market on the Super Highway in Karachi, as buyers stayed
away due to security fears, according to the Daily Times. Vegetable and fruit
traders, wholesalers, farmers and growers have suffered financial losses due to
the absence of transport. Businesses will continue to suffer losses as goods
carriers are dissuaded from entering the violence-prone city through fear of a
backlash from emotionally charged mourners.
The city is still reeling from the December 28 suicide attack on a procession
of Shi'ite Muslims in Karachi, when at least 43 people were killed and
businesses suffered losses worth millions of dollars. Local traders demanded
then that government improve security, but the latest explosions have sparked
renewed anger at the central authorities' apparent lack of action.
"I think the government is serving its own interest by not taking action
against the real culprits who took part in the Boulton Market arson attacks [on
December 28]," The News quoted Atiq Mir, chairman of the Alliance of Markets
Association, as saying. "I believe these responsible people may again damage
shops taking advantage of any opportunity."
During the first week of February, at least 42 people lost their lives in
targeted killings in Karachi. Under anti-terrorism legislation, Rangers have
been given special powers after police failed to impose law and order in the
city. Local analysts see the problems in Karachi as a new development on the
political front, straining ties between the ruling Pakistan People's Party
(PPP) and its key partner, the Muttahida Qaumi Movement (MQM), in the coalition
government in southern Sindh province. President Asif Ali Zardari and Prime
Minister Yousaf Raza Gilani are trying to mend relations with the MQM, as their
PPP party is already facing criticism from the opposition and from the general
population as they struggle against soaring inflation and energy shortages.
Zardari is also facing calls to step down after the Supreme Court struck down
an amnesty, the National Reconciliation Ordinance (NRO), promulgated by former
president Pervez Musharraf that had protected the increasingly unpopular leader
and several of his political allies from corruption charges.
The decision to slash the government's development program for the current
fiscal year to 300 billion rupees (US$3.5 billion) from 421 billion rupees
compares with an initial proposed outlay in the 2009-10 budget of 646 billion
rupees. This mirrors a pattern seen in the 2008-9 fiscal year, when the
development program was planned at 550 billion rupees, only to be cut to 419
billion rupees then to 269 billion rupees.
The government is facing an ever-tightening squeeze as security costs rise and
investment declines. It is also receiving less than expected cash from funds
pledged last year at the Friends of Democratic Pakistan summit in Tokyo. Delays
in projected foreign inflows and non-tax revenues from foreign reimbursements
could make it more difficult to stay within the fiscal deficit target of 4.9%
of gross domestic product (GDP), or 740 billion rupees, according to the
central bank. The deficit may widen to 5.3% of GDP this fiscal year, according
to Finance Minister Shaukat Tarin. The fiscal deficit for the first quarter
(July-September) was 1.5% of GDP, 0.2% worse than the target.
Only Saudi Arabia has extended $300 million to Pakistan out of the total
pledged of $700 million in Tokyo by donors, according to a report in the
Business Reporter. Nor has the United States released funds under the Coalition
Support Fund for several months on the pretext that the government of Pakistan
is creating problems in issuing visas to US nationals.
If the government aims to meet the fiscal deficit target it will have to
increase its borrowings from the banking system and non-bank sources.
The World Bank has committed up to $1.3 billion for Pakistan in the current
fiscal year but it is concerned at the country's capacity to generate revenue,
as tax as a percentage of GDP is about 9%, one of the world's lowest rates.
"Increased insecurity has not affected bank projects," Reuters quoted Yusupha
Crookes, World Bank country director for Pakistan, as saying. "If everything
gets delivered, which we very much expect will be done, we will make
commitments of around $1.2 billion to $1.3 billion for the current fiscal
year,"
The government's other key source for cash is the International Monetary Fund,
to which Pakistan, facing a balance of payments crisis, turned to for a $7.6
billion loan package that was agreed in November 2008. The loan was increased
to $11.3 billion last July.
Syed Fazl-e-Haider (www.syedfazlehaider.com) is a development
analyst in Pakistan. He is the author of many books, including The
Economic Development of Balochistan (2004). He can be contacted at
sfazlehaider05@yahoo.com.
(Copyright 2010 Asia Times Online (Holdings) Ltd. All rights reserved. Please
contact us about
sales, syndication and
republishing.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
