Pak economy thrives on post-9/11 windfall

Since then, growth and company profits are up; Budget deficits and interest rates are down. As stocks worldwide tanked, they shot through the roof here, with Karachi Stock Exchange surging 112 per cent—the highest percentage gain in 2002 of any major bourse on earth.

‘Pakistan has turned around a deteriorating macro (economic) situation of a few years ago to a rapidly improving one,’ according to an upbeat World Bank report. The United States agrees.

“September 11 was a turning point,” said Terry White, a spokesman at the US embassy in Islamabad, “Pakistan was really teetering before then.” After Pakistan sided with Washington as it sought to oust the Taliban, western nations rewarded it by dropping sanctions after the nuclear test. Washington also kicked in $1 billion in aid—$600 million of which did not have to be repaid.

Pakistan also benefited by selling construction materials to rebuild war-ravaged Afghanistan, according to Ashfaque Khan, a top economic adviser to the Pakistan government. He said the production of cement in the country had increased sharply as a result.

But it’s most consequential post-9/11 windfall may have come from the flood of cash that poured in as Pakistanis abroad withdrew money from foreign accounts and sent it home. That they sent it home at all helped the economy to begin with. What’s more, their reluctance to use an ancient informal money-transfer system called hawala—which was suspected by Washington of being used by terrorists—led many Pakistanis to send money home using legal banks.

The World Bank report said remittances from abroad nearly tripled in 2002, fattening foreign reserves from around $3 billion before 9/11 to over $9 billion today. Fatter coffers have, in turn, eased budgetary pressures and strengthened the Pakistani rupee by almost 10 per cent against the dollar.

But in a year when bad economic news often turned into good news, some news stayed bad. The World Bank pointed to endemic corruption and red-tape. And questions remain about whether any post-9/11 benefits are trickling down. At least 45 million Pakistanis live below-the-poverty-line, according to government figures. And not all the economic trends stemming from 9/11 were positive.