KARACHI, Dec 31: What the year 2008 has in store for Pakistan’s business and economy? This question begs for an answer from the economic managers, as on the last day of the year 2007, Karachi Stock Exchange, once proclaimed to be the best performers in Asia, dipped down by as many as about 700 points. The rupee exchange value touched bottom lowest in last six years at Rs61.95 for a dollar at one time. It was salvaged only by the central bank’s intervention.

Wild fluctuations in share values in stock exchange, according to a market analyst, help a set of brokers, and there are reasons to believe that quite a few of them are set to make a few more billions from Monday trading.

So is the case in rupee exchange value fluctuation. “Pakistan is one country where rich, powerful with right connections make money from swing of pendulum, whichever way it is,’’ the analyst remarked.

But Pakistan has now taken a plunge in a deep political uncertainty that has engulfed entire business and economic activities in the country.

A well-known leader from Jodia Bazar, the biggest commodity market in South Asia, has said investors of commodity trade are fast moving out of the business.

“Existing contracts are being scrapped and no new contract for supply and purchase of commodities is not being made,” he said.

Food inflation was already in double digit; much before the present uncertainty has set in. It is now more pronounced and consumers complained on Monday of not being able to get provisions.

Wheat flour was not available in many parts of the city. It was priced at Rs24 to Rs26 a kg where it was available in “ration”. Sugar, edible oil, pulses, rice, milk and eggs are already costly and there is a fear of prices of many of these items going further up as political situation becomes murkier in the coming days.

Two of three kharif crops—cotton and rice—did not give projected production this autumn.

Sugarcane production was more than the target. But the unending battle between the millers and growers has made sugar a bitter commodity for the consumers.

About three million bales of cotton is expected to be imported. It would on the one hand push up import bill and on the other increase production cost. Rice production is below target and is already being sold at a much higher price.

There is already a lot of confusion about wheat production and supply next spring. The government has fixed a production target of 24 million tons. But market watchers doubt of achieving this target as government’s tentative approach in drawing up a policy has put growers in confusion. In the current season, the government messed up wheat marketing and in the face of official claim of 23.5 million tons production, the price of wheat flour in August and September was Rs18 and Rs19 a kg.

The lingering political uncertainty is bound to cripple the business and economic activities that may bring down further industrial production which in turn may further retard export growth.

A slowdown in industrial and agricultural production may cause spur in import demand for goods and import bill at the end of June 2008 may touch $36 to 37 billion. The trade deficit by June next may swell over $15 billion and there are businessmen who apprehend it may touch $16 and even 17 billion.

Pakistani rupee is already under severe strain, and the State Bank of Pakistan is intervening on many occasions to keep the Rs61.50 per dollar.

Monday’s steep fall in rupee exchange parity with dollar was a manifestation of mounting pressure on rupee in the inter-bank and in open market. Bankers doubt State Bank’s capacity for intervening on all occasions.

While the State Bank of Pakistan was warned in 2006-07 of economy coming under impact of a double edge sword (rising trade imbalance and mounting current account deficit and a bulging budget deficit), it is becoming a reality in 2007-08 and may show its fall in next six months of 2008.

There is already a talk of reviewing the 2007-08 budget in the context of new developments—rising oil prices, mounting pressure of subsidies that is forcing government to borrow from the banking sector. But then there is no political leadership to take hard decisions on these issues.

A caretaker setup is incapable—morally and legally—to take economic decisions with long-term implications. There is a big question mark on country’s politics even after the elections are held on schedule on Jan 8 or if elections are put off to a next date?