Pakistan's "Macabre" vs Micawber's economics

Ali Khan recalled: “General Beg called me for a cup of tea. He said, ‘Don’t you realize we are on the brink of economic collapse? I can change that by selling what we are good at. I can offer this country a lot. Six, eight, ten billion dollars.’ I laughed. I said, ‘You can’t be serious.’ The general said, ‘I am very serious.’ He then mentioned selling our bombs to Iran. He said, ‘Nisar you can argue with me but that’s not your job. You tell Nawaz Sharif that this is a good idea. It’s the prime minister’s position to decide.’
[ Deception: Pakistan, the United States and the Secret Trade in Nuclear Weapons by Adrian Levy]

It was 1988.  US was leaving Afghanistan and dollars were drying up quickly.  Pakistan had almost completed the Nuclear acquisition and perfected the technology.  With nothing much to export, General Aslam Beg now had set his sights on what was Pakistan’s greatest achievement hitherto – the Nukes.

Iran did not however get the Nukes directly though – because it was after all a radical Shia regime (it did get the P1 and P2 class reactor technology subsequently).

The beneficiary and the payer became Saudi Arabia.  It could not bother with the technology, so to arm their Chinese CSS-II missiles, Pakistan gave them what was required and saved the country from economic collapse.

Aid was Pakistan’s “monetary and fiscal policy”.  When it was absent, then it was Nuke and military sales.

THAT is the reason why Army has never let a democratic government last in that country.

2008 – twenty years since Beg decided to sell nukes to escape the begging – now the situation has turned a full circle!  But in the last few years, Iran and North Korea have become hot places and in full glare.  And for last few years US was feeding the Pakistani coffers so the market saturation of countries who wanted Nukes on the sly did not matter.  Now even the US doesn’t have enough to give.  Afghanistan’s poppy sales is also no longer feeding the coffer of the Army.  The break-down is virtually total!

Such is the economic turmoil in Pakistan that it’s inflation has shot up to 25 per cent, and forex reserves are plunging to an all time low.  With a total of $8.1 billion forex by September, the real reserves are estimated to be just $3 billion after accounting future liabilities.

Reports suggest that it is barely enough for Pakistan’s one-month imports, and if assistance is not provided immediately, the situation would turn for worse. There is a huge gap of $7 billion to cover in a projected current account deficit of $14 billion for the financial year ending June 30, 2009.

The rating agency Standard & Poor has cut the rating on Pakistan’s sovereign debt rating to CCC+, which is barely above the default level.

Now, barring these “Sources of Income” – Pakistani leaders and Army had never planned for other sectors to become any replacements!  But even these are now under strain and almost non-existent.

The worst nightmare of the world is now unfolding – a nuclear state is going down and the extremists who planned and executed the most spectacular terrorist act in the history of modern world are bold and unflinching in their mission – to prevail.  US is on the border and executing more and more missions in to the territory of Pakistan and bombing as well.

At such a distance and lacking any knowledge it is difficult to predict or even say for certain – but my instinct says clearly that at this very moment a fight is going on in stealth-mode and it is for identifying and “securing” the Nukes of Pakistan.

Pakistani leaders meanwhile are back to their old game – asking for aid.  Obviously the question before US and others is – is another round of aid the best way to deal with this situation.  Should more money be given – knowing it will be wasted on the generals and on infrastructure that is and was planning the next move.  Or should the world buy time??  Until nukes can be secured.

In the coming months, the world will deal with many difficult variables – financial collapse of the world’s economic system will be just one part of the entire deal. International warfare – military and economic – will be FAR more significant a misery to face our generation.

Meanwhile, in South Asia, Pakistan’s masses will pay for the private passions and hatreds of their leaders.  As the economic misery unfolds, many new reasons and villains will be created by the current lot of Pakistani political, religious and social leaders – but none would even look at the most obvious – to ask a simple question:

For all that I consume, what do I sell to the world?

Mr. Micawber says in the classic David Copperfield on economic wisdom:

“Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

The next world war (or its variation – “Clash of Civilizations”) will not be won with bombs but by sheer economic expertise.  Economics is not  rocket science.  Then why put it in the hands of your rocket scientists?