India Uncut

This blog has moved to its own domain. Please visit for the all-new India Uncut and bookmark it. The new site has much more content and some new sections, and you can read about them here and here. You can subscribe to full RSS feeds of all the sections from here. This blogspot site will no longer be updated, except in case of emergencies, if the main site suffers a prolonged outage. Thanks - Amit.

Friday, February 10, 2006

9/11 and Pakistan’s economy

The world changed on September 11, 2001, and for Pakistan, it changed for the better. Akbar Zaidi, an economist I met in Karachi, told me that the upturn in Pakistan’s economy was entirely due to foreign aid. He explained that in the context of why Pakistan’s economy seemed to do better under military rulers: not because there something inherently sound about military rule, but because of happenstance: the periods of military rule happened to coincide with Pakistan’s emergence as a strategic hub for the USA in South Asia. General Zia-ul-Haq benefited from the Soviet invasion of Afghanistan, and General Pervez Musharraf gained from 9/11.

As Pakistan became a frontline state in the War against Terror, massive US Aid flowed in, as external debts were restructured in favourable terms and the Americans took an active interest in keeping Pakistan afloat. Dr Farrukh Saleem, an economist, wrote in a recent column in The News on Sunday:
[T]he US Department of Defence has been depositing a cool $100 million a month into our treasury for the last four years. The US forgave $3 billion worth of bilateral debt, and then convinced the Paris Club lender nations to reschedule a large portion of our $38 billion bilateral debt on easy terms. Add it all up -- and thank Osama -- for the total bonanza is going to be a colossal $40 billion.
Thank Osama indeed. Murali, my new friend in Islamabad, tells me that some Pakistani journalists would refer to Al Qaeda as Al Faeda after 9/11, such was the benefit to Pakistan. We were chatting about Peshawar, and Murali said, “There are journalists in Peshawar who became crorepatis after 9/11. They would charge 300 dollars a day to act as local guides for foreign journalists.”

“You mean 9/11 spawned a support industry of its own?” I asked.

“Not just 9/11, but also the earthquake,” he said. That took my mind back to a gentleman from Islamabad whom I’d met in Karachi, who rented his posh SUV out, at an exorbitant rate, to foreign aid workers to visit the earthquake-affected areas in.

“The price of land also shot up,” Murali tells me. “Non-resident Pakistanis got worried about investing abroad, and felt safer investing in Pakistan. Also, a lot of people felt that they’d rather keep their money in real estate than in banks.

“In fact, if 9/11 had not happened, the dollar would have been 80 or 90 [Pakistani] rupees instead of what it is now. [Between 55 to 59, depending on the source.]”

9/11 also gave Pervez Musharraf respectability, of course, and it helped in legitimising his rule. But I’ll write more on Musharraf later.
amit varma, 8:33 PM| write to me | permalink | homepage

I recommend: