Pakistan’s Economy is a U.S. National Security Issue

Political security in Pakistan cannot be achieved without addressing economic insecurity, and energy shortages are a major cause of economic insecurity. As we traveled in Pakistan, we encountered growing agitation about bread-and-butter issues. This was corroborated by a poll conducted in June by Terror Free Tomorrow in which 86 percent of Pakistanis said they struggled to buy flour and 81 percent said they had been hurt by the high price of fuel. “The real security issue is the state of the economy and the tremendously high expectations of the people,” said Nafisa Shah, an Oxford-trained anthropologist who now represents a rural Sindh district in the National Assembly. “There is tremendous public pressure.”

Rescheduling of debt, inflow of investment from the Persian Gulf into the property market and cell phone companies, expansion of consumer credit, and repatriation of Pakistani wealth held abroad are all cited as factors behind the boom that followed September 11, 2001, when Pakistan’s economy grew as much as 7 percent per year. Inflation in food prices, stalled growth in the agricultural economy, and unemployment all persisted during the boom, however, and now, with the boom over, economic stress even more pronounced. Pakistan’s energy crisis is hurting the important agriculture and textile sectors, with irrigation pumps and looms idled by power cuts, and its foreign currency reserves are running out. Additionally, declining foreign currency reserves, caused largely by rising costs of imported oil, threaten the country’s fiscal viability.

The U.S. government needs a stable Pakistan, but it has so far exacerbated Pakistan’s economic problems by not addressing the country’s energy shortages. The United States should reconsider its opposition to the pipeline now on the drawing board to connect natural gas fields in Iran with markets in Pakistan and India and its refusal to offer Pakistan a plan for cooperation on civilian nuclear power plants similar to one agreed to with India. Both U.S. positions are based on non-proliferation concerns, with the Iran-Pakistan-India pipeline running afoul of U.S. demands for international sanctions against Iran’s uranium enrichment program. They have had the effect of slowing economic growth that the new civilian government needs in order to maintain its political viability. An agreement of civilian nuclear cooperation need not be hastily made. Negotiations on the issue should address U.S. requirements for nonproliferation. But the negotiations should begin soon.

The rising price of staple food items, particularly flour, is another urgent problem undermining support for the Pakistani state. While the United States has offered emergency food supplies, a longer-term program to provide food security to average Pakistanis is necessary. The United States should take care that airlifts of American wheat do not economically undercut Pakistan’s own food production. Longer-term cooperation on water supply and irrigation as well as on the development of agricultural extension services and micro-credit for the poorest Pakistanis in rural areas is also vital.

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