Pakistan’s year was tough before the flooding started

By Maria Kuusisto

Even before the heavy rain began to fall, Pakistan was suffering through more than its share of political, economic, and security worries. The Pakistan Peoples Party (PPP) government and President Asif Ali Zardari face fast-falling approval ratings, and multiple political and legal challenges that distract them from governing the country more effectively and creating a working, civilian-led counterterrorism strategy to target safe havens that militants have established in tribal areas along the country’s border with Afghanistan, particularly in North Waziristan. That has helped the various Taliban and al Qaeda-linked terrorist groups, which now coordinate their work more closely, to launch a bombing campaign in Pakistan’s largest cities, killing thousands of Pakistanis in recent years in response to US and Pakistani military strikes.

The political distractions have also made it more difficult for the government to tackle the country’s considerable economic troubles, which include the need to stabilize a deepening fiscal crisis, stimulate a stagnant economy, expand the tax base, cut subsidies, and tackle high inflation. The recent flooding, which covers about 20 percent of the country, has made matters much worse.

Over the past three years, Pakistan has experienced a major economic slowdown. Local manufacturers have been hit hard by reduced demand for Pakistani goods in many countries, higher operating costs, and frequent work slowdowns thanks to a worsening electricity shortage and a volatile security situation in many areas. That’s an especially large problem, because manufacturing accounts for about 25 percent of Pakistan’s GDP, 60 percent of the country’s exports, and nearly half of Pakistan’s jobs.

The flooding was just the latest bit of extraordinarily bad news. State officials hoped that this year’s expected bumper crop for cotton, the country’s second biggest crop (after wheat), would stimulate textile production, the largest sub-section of Pakistan’s manufacturing sector. The flooding will probably cost Pakistan at least 2 million bales of cotton this year of the 14 million that was expected. Faced with shortages, the textile sector will be forced to pay dearly for imported cotton, which will then make Pakistani textiles more expensive — and, therefore, less competitive.

These problems risk large-scale layoffs in the textile sector, a development that would deepen the country’s economic troubles, further undermining the government’s credibility. The inevitable ripple effects through the rest of Pakistan’s economy can only make it easier for Taliban and other militant groups to expand their influence in the country’s poorest provinces and to recruit in larger numbers.

The Pakistani government is not about to collapse. Though the country’s major opposition parties and military will compete with the government to claim credit for aid to flood victims, they would rather let Zardari and his ministers take full blame for the hard times to come than to claim power for themselves. And they certainly have an interest in protecting the country’s baseline security and stability.

Yet, the devastating floods ensure that a tough year for a struggling country will become tougher still — and could fuel a level of unrest not seen since independence.

Maria Kuusisto is an analyst in Eurasia Group’s Asia practice.