Pakistan In Freefall

Fasih Ahmed reports on the situation in Pakistan:

The Zardari government is sailing into a perfect storm of political instability and economic turmoil. The economy is in a virtual freefall. International agencies have slashed its credit ratings. The rupee has hit an all-time low against the dollar. Capital flight is believed to be continuing despite efforts to stop it.

Suicide attacks and kidnappings have led to the repatriation of foreign skilled labor. The bourses are a blood bath as foreign investors continue to pull out. Unable to pay its bills, the government has taken to issuing I.O.U.s to private- and public-sector companies. Overall inflation is at a punishing 30-year high. Power shortages, the worst in at least 15 years, are disrupting businesses already hurt by higher input costs. To top it off, much-needed funding and easier terms promised by Pakistan’s allies and multilateral donor agencies have yet to materialize. Foreign-exchange reserves, worth about two months of imports, are fast running outand with the worsening economic situation, so is public patience.