October 11, 2001	Thursday	Rajab 23, 1422

KARACHI, Oct 10: The world has changed for everyone since the day of the attacks on the World Trade Center and the Pentagon. But because of its location—in immediate neighbourhood of the country that is in the eye of the storm— the status of Pakistan has quickly spiralled from one of not much significance to that of perhaps the most closely watched nation in the world today. The limelight may turn out to be both a boon and a bane for the country’s economy.

Immediately after the September 11 incident, the country received the last tranche of $136 million, which already was in the pipeline. Economic sanctions were as quickly lifted as they had been clamped. Grants, even if in smaller sums as $40 and 50 million flowed in from Japan and the US. Pakistan, which is saddled with the enormous sum of $36.8 billion in total debts, is asking for waiver, write-offs and rescheduling. The Finance Minister is in Washington to negotiate the $2.5 billion PRGF soft term loan and to seek relief from quota restrictions, duty-free access to US markets, all of which are expected to meet with sympathetic considerations from the US and other donors.

But how bad is the economic fall out of the current crisis on Pakistan? Economists and analysts are feverishly working that out by the day. President Pervez Musharraf has publicly expressed concerns over the cancellation of trade deals and flight of foreigners from the country. Just before he boarded the plane to Washington, Finance Minister stated that he expected shortfall in exports and revenue collections, but hoped that the inflow of remittances and emergency assistance from major countries would tide over the difference.

The revenue collection target for the current fiscal year at Rs443.7 billion, many analysts say, had been set on the higher side in the first place. Exports are targeted at $10.1 billion. And one of the most jittery statements came out from the Commerce Minister Abdul Razak Dawood, who early on estimated that the exports would fall short by as much as $1.6 billion due to the current crisis. But import and export trade have both surely come under pressure from an additional $500 million per container that shipping companies have begun to charge in higher freight and war risk insurance premium.

A major concern for the country’s economic managers is the possible influx of millions of Afghan refugees. About $600 million have been received mainly from US and UK, for the care of the Afghans who may flee in fear of war, hunger and the approaching winter. More relief is expected to be in the pipeline.

But for all the gloom and doom, early economic indicators flash mixed signals. Since September 11, the Pakistan rupee has strengthened by 2.24 per cent against the US dollar which according to an analyst at a local brokerage house— InvestCap Securities— reflects the strongest gain among eight major world currencies including, UK pound, which has gone up by 0.84 per cent; German DM up 1.56 per cent; European euro up 1.56 per cent; Japanese yen up 0.83 per cent. Indian rupee has, meanwhile, lost 1.4 per cent and Singapore dollar 2.51 per cent against the dollar.

After plunging to its lowest for the year to 1,075 points on October 2, the Karachi Stock Exchange index has regained about 75 points in the two days to October 11, which some brokers attribute to the return of the foreign investor, followed by local buying. The foreign exchange reserve figures continue to portend health, thanks to the aid flows and possibly larger home remittances.

Export figures for September reflect improvement over both, those of August this year and September of last year. Shipping activity at the Karachi port looks near normal. Air cargo services if stopped by some airlines are taken over by the other airlines, which do not reflect build up of an extraordinary high stock piles at the airports.

Prices of precious metal gold soared in the initial days after the September 11, but has dropped to a more normal level. And retail prices of major commodities have not hit the ceiling; there is surely no panic buying and no long queues of customers are to be seen outside the ration shops in major cities.

But for all the normalcy on the surface, there is a deep lurking fear of the unknown. As political landscape changes by the day, most traders and businessmen say that they look at the current situation as being extremely fluid and dicey.