Musharraf's Economic Legacy


Regardless of the criticism of President Musharraf's politics or personality, there is general agreement among independent economists that, through his structural reforms and economic management, President Musharraf left Pakistan's economy in much better shape than he found it when he seized power in 1999.

Here are some of the key highlights of the results of Musharraf era economy:

1. Pakistan's tax base and government revenue collection more than doubled from about Rs. 500b to over Rs. 1 trillion.

2. Pakistan's GDP more than doubled to $144b since 1999.

3. Most recent figures in 2007 indicate that Pakistan's total debt stands at 56% of GDP, significantly lower than the 99% of GDP in 1999.

4. Pakistan attracted over $5 billion in foreign direct investment in the 2006-07 fiscal year, ten times the figure of 2000-01. Contrary to accusations by Musharraf's detractors that it was an artificial consumer-led growth, it was really an investment-led boom that Pakistan experienced in Musharraf years.




5. In spite of the election-related political turmoil, Pakistan’s economy maintained its momentum in 2007, growing by 7%, slightly more than the 6.6% for 2006. Agricultural sector growth recovered sharply, from 1.6% in 2006 to 5% in 2007, while the manufacturing sector growth continued at 8.4% in 2007, slightly more moderate than the 10% for 2006. Services grew at 8% in 2007, down from 9.6% in 2006.

6. The strong consumer demand in Pakistan drove large investments in real estate, construction, communications, automobile manufacturing, banking and various consumer goods. Millions of new jobs were created. By all accounts, the ranks of the middle class swelled in Pakistan during Shaukat Aziz's term in office. According to Tara Vishwanath, the World Bank's lead economist for South Asia, about 5% of Pakistanis moved from the poor to the middle class in three years from 2001-2004, the most recent figures available. In 2007, analysts at Standard Chartered bank estimated that Pakistan has a middle class of 30 million which earns an average of about $10,000 per year. And adjusted for purchasing power parity (PPP), Pakistan's per capita GDP is approaching $3,000 per head.

7. The Karachi stock market surged ten fold from 2001 to 2007.

8. Pakistan positioned itself as one of the four fastest growing economies in the Asian region during 2000-07 with its growth averaging 7.0 per cent per year for most of this period. As a result of strong economic growth, Pakistan succeeded in reducing poverty by one-half, creating almost 13 million jobs, halving the country's debt burden, raising foreign exchange reserves to a comfortable position and propping the country's exchange rate, restoring investors' confidence and most importantly, taking Pakistan out of the IMF Program.

The Wall Street Journal did a story in September 2007 on Pakistan's start-up boom that said, "Scores of new businesses once unseen in Pakistan, from fitness studios to chic coffee shops to hair-transplant centers, are springing up in the wake of a dramatic economic expansion. As a result, new wealth and unprecedented consumer choice have become part of Pakistan's volatile social mix."

The one sore spot that sticks out in President Musharraf's and Shaukat Aziz's record is their lack of attention to the rising energy needs of the country. Appropriate planning should have comprehended new power plants to support growth forecasts. There were other mistakes as well, such as the decision to export wheat in 2007 that created shortages and price hikes that helped bring down the PML (Q) government and ultimately led to President Musharraf's departure.


Since the takeover by the PPP-PML(N) coalition, there has been a sharp decline in Pakistan's economy. Summing up the current economic situation,the Economist magazine in its June 12 issue says as follows:" (The current) macroeconomic disarray will be familiar to the coalition government led by the Pakistan People's Party of Asif Zardari, and to Nawaz Sharif, whose party provides it “outside support”. Before Mr Sharif was ousted in 1999, the two parties had presided over a decade of corruption and mismanagement. But since then, as the IMF remarked in a report in January, there has been a transformation. Pakistan attracted over $5 billion in foreign direct investment in the 2006-07 fiscal year, ten times the figure of 2000-01. The government's debt fell from 68% of GDP in 2003-04 to less than 55% in 2006-07, and its foreign-exchange reserves reached $16.4 billion as recently as in October." Please read "Pakistani Economy Returning to the Bad Old Days".


The current government hailed the performance of Pakistan's economy under President Musharraf's watch as follows: "Pakistan's economy witnessed a major economic transformation in the last decade. The country's real GDP increased from $60 billion to $170 billion, with per capita income rising from under $500 to over $1000 during 2000-07". It further acknowledged that "the volume of international trade increased from $20 billion to nearly $60 billion. The improved macroeconomic performance enabled Pakistan to re-enter the international capital markets in the mid-2000s. Large capital inflows financed the current account deficit and contributed to an increase in gross official reserves to $14.3 billion at end-June 2007. Buoyant output growth, low inflation, and the government's social policies contributed to a reduction in poverty and improvement in many social indicators". (see MEFP, November 20, 2008, Para 1)

In addition to the improved economy, President Musharraf's policies enabled halving of poverty from 34% in 2000 to 17% in 2008, proliferation of independent radio and television stations, and an expanded middle class, which ultimately led to his downfall.

It was on "dictator" Musharraf's watch that Pakistan saw unprecedented deregulation of the mass media, prolific growth, and vibrant debate that had never occurred before him. None of the "democrats" or "dictators" who ruled before him gave such a gift to the people of Pakistan.

It is this media freedom that I think is Musharraf's best legacy that can not be easily denied or reversed. It'll serve Pakistan well by shining light on the misdeeds of Pakistan's leaders now, and in the future.

Related Links:

Haq's Musings

FDI in Pakistan

Video: Who Says Pakistan Is a Failed State?

Structural Reforms in Pakistan's Economy

President Musharraf Video Defense on Power Crisis

Comments

Diep Nguyen said…
Hi,

I find your blog really interesting. However, I have a question regarding your post August 19, 2008- Musharraf's Economic Legacy.

You stated here that 5% of Pakistani moved from being poor to the middle class. What are your sources? I can't seem find the original source from Worldbank's website either.

Thanks in advanced.
Riaz Haq said…
Diep: "You stated here that 5% of Pakistani moved from being poor to the middle class."

Here's the quote from NY Times I was referring to:

"The size of Pakistan’s expanded middle class is in fact debated. Tara Vishwanath, the World Bank’s lead economist for South Asia, said 5 percent of Pakistan’s 160 million people — or roughly 8 million Pakistanis — appear to have moved from living in poverty to being part of the lower middle class between 2001 and 2004. She said data being collected this year was needed to confirm whether the increase was permanent."

More recently, ADB has published a report saying Pakistan's middle class is 40% of the population.

http://www.adb.org/Documents/Books/Key_Indicators/2010/pdf/KI2010-Special-Chapter.pdf
Riaz Haq said…
Here's a report on Fortune magazine's interview with Pakistan's former leader Shaukat Aziz:

Despite the regular eruptions of bad news from Pakistan, Shaukat Aziz, a former finance and prime minister there, remains cautiously bullish about his country's prospects, including the peace dividend that could come with the orderly exit of U.S. troops from Afghanistan. But that depends, he says, on a Marshall Plan-like reconstruction of Afghanistan -- and the U.S. delivering on tribal economic development plans.

That might seem overly ambitious for distracted Western capitals with tapped out coffers. But the 'mostly-sunny' technocratic vision is not unusual for Aziz, a former Citibank (C) executive who presided over strong growth as finance minister after General Pervez Musharraf staged a coup in 1999. (Musharraf just announced he would shortly be returning to Pakistan -- and risking arrest -- from Dubai where he has been since leaving office.)

Aziz, 64, was elected prime minister in 2004 (surviving an assassination attempt while campaigning) and was the first of 23 predecessors to serve out a full term, until 2007. He took up residence in London soon after and now serves on the board of the British hotel chain Millennium and Copthorne Hotels, and as an advisor to the Blackstone Group (BX).

Aziz recently spoke with Fortune about the state of Pakistan's economy, how to rebuild Afghanistan, and why Pakistan deserves a free trade agreement with the U.S. Below is an edited transcript of that discussion.

It's been more than six years since Goldman Sachs (GS) recognized Pakistan among the Next Eleven newly industrialized countries -- inflation is up, investment is at a 40-year low, and infrastructure is deteriorating, particularly in the power sector. By just about any measure things are not particularly good, so what is the source of your optimism about the Pakistani economy?

The problems of the world economy have obviously leaked to Pakistan. Yes, investment is down, trade also, but in Pakistan's case a lot of this is due to the security situation, the war on terror. We have to pay a huge price in terms of damaging our investor confidence -- both domestic and foreign.

On the other hand, we should bear in mind that more than two-thirds of the population lives in rural areas and agriculture has done well, especially in cotton -- prices and exports are up and the farmer is relatively more comfortable.

The country's human capital is a strong suit, the Pakistani people are very talented, their skills levels are impressive and they are hard-working. There's a huge number of Pakistanis working overseas and we can export a few more million and there won't be an iota of difference because there is a whole pipeline of trained – and untrained - people coming.
-------------


http://finance.fortune.cnn.com/2012/01/09/pakistan-shaukat-aziz/?section=magazines_fortune
Riaz Haq said…
Here's a report on Fortune magazine's interview with Pakistan's former leader Shaukat Aziz Part II:

You mentioned the need for good management. How would you assess the current management of the economy? I ask that in light of the lapsing of the stabilization plan with the IMF.

Being out of the IMF -- obviously this reflects the desire of the government to have more flexibility to pursue its reforms. The IMF program does bring with it certain macroeconomic discipline and that's beneficial, but I also believe in economic sovereignty. You need good governance and good management, but abdicating the economy to the IMF is not the way to succeed. What we need is growth and job creation, like every other country in the world.

The disagreement with the IMF is at least in part related to tax collection, which has been notoriously weak in Pakistan. There is a lot of concern whether Pakistan can muster the political will to make tough reforms, partly because of self-serving elites among the political class that have brought the country to the point of being nearly a failed state.

No, I think that's not true. The country is large -- roughly 180 million people -- and it's functioning. It has many challenges -- governance issues, transparency and management issues -- on top of the security issues that have cost us dearly. But the country is functioning. Obviously it could function better, but it's not come to a grinding halt. Life is going on.

Don't expect an Iranian oil crisis

Clearly, the country is facing a challenging situation financially, and tax reform has been an issue. It's true there is low tax compliance, but you have to look at the political impact -- not just the economic impact -- of taxes. The tax system has been around for a long time. Trade-offs have to be made; indirect taxes -- sales tax and customs duties -- have grown because of that, quite handsomely. Income tax is also up, but that is mostly out of big corporations' profits.

The key question is: How do we get growth? The pie has to get bigger for you to collect more taxes. You can't squeeze the lemon if there's no juice in it.

Moving on to Afghanistan, the U.S. is being more realistic about its transformative agenda and the Obama administration seems to be determined to wind things down. How do you see this playing out?

I think this is the right way to go. The presence of foreign troops generates ill effects and the sooner they are gone, the better. But the exit strategy has to be very carefully choreographed.

We need a Marshall Plan-like approach, a massive program for reconstruction. The World Bank, the Asian Development Bank, the sovereign banks, and many individual countries, have to be involved. There was a very successful meeting recently of Turkey, Pakistan, Afghanistan and others in Istanbul. People need to see a future, that tomorrow will be better than yesterday. The people of Afghanistan will have to work hard themselves to leverage this opportunity. It's a good thing that the U.S. and the Taliban are talking -- all stakeholders have to be included. I'm cautiously optimistic that adversity can be changed into an opportunity if it is funded well.

U.S.-Pakistan relations are generally refracted through the prism of Afghanistan but also through the fact that Pakistan is a nuclear power.

I think certainly the relationship is opportunistic on both sides. But I think the U.S. is pursuing a policy of both engagement and containment of Pakistan at the same time. We are both a friend and an adversary. Therein lies the conflict in the relationship. There is a trust deficit and when it comes to the nuclear issue there is a fundamental problem.....


http://finance.fortune.cnn.com/2012/01/09/pakistan-shaukat-aziz/?section=magazines_fortune
Riaz Haq said…
Here's a report on Fortune magazine's interview with Pakistan's former leader Shaukat Aziz Part III:

Investing after the Arab Spring: Unfinished business

When India was drawn into the Nuclear Suppliers Group (a multilateral anti-proliferation organization) Pakistan should have been included too. The United States has to decide: are we in the tent or outside? That was a major missed opportunity. Inclusion in the NSG comes with a lot of responsibility and obligations. Engagement becomes more formalized, providing a forum for all key players to be around the table to discuss and solve issues. We are a nuclear power – there is no such thing as a halfway house here - and to deny it doesn't help anybody. It's not too late to rectify this. It would help the whole atmosphere in South Asia. If you keep people out of the tent, things can suddenly move the other way.

You've said that Pakistan would be better off with a free trade agreement with the U.S., instead of aid, but given the state of US-Pakistan relations that seems very unlikely.

I'm not optimistic about a free trade agreement because even when Congress was very friendly, they couldn't get things through, even things which were promised like the Reconstruction Opportunity Zones in the border area of Afghanistan and Pakistan, which was important for all three countries. The idea was to give duty-free access to the U.S. market for any goods produced in the tribal areas. Obviously when you put up a factory there the cost of production will be high, initially at least, because there is no infrastructure. This was a well-conceived and well-designed way of creating jobs. Otherwise they will have no incentive to put down their guns. Congress has approved other special market access programs like this for Haiti and Jordan, and maybe others. It was promised by the U.S. five or six years ago but nothing happened.

We really need to re-focus on these things so that when peace returns in the area, especially in the border areas, people will have alternatives for making a living. Security is not a big issue. It can be done by local people. You don't need expatriates; there are already plenty of entrepreneurs in that area. You're talking about very small numbers for the textile market, but symbolically it's very important because it will give people hope. This would be a good way for the U.S. government and Congress to send a message to people in the border areas: we want you to have a better, peaceful future.....


http://finance.fortune.cnn.com/2012/01/09/pakistan-shaukat-aziz/?section=magazines_fortune
Riaz Haq said…
Here's an ET report on social sector development during Musharraf years:

According to the report’s HDI list, between 2000 and 2007, which roughly corresponds with General Pervez Musharraf’s regime, the Human Development Index rose 18.9 per cent — an annual average of 2.7 per cent.

From 2007 to 2012 it only went up by 3.4 per cent, just under 0.7 per cent per annum. Somehow, things got even worse in the last three years of that time frame, with HDI increases crashing down as low as 0.59% — a negligible average annual increase of under 0.20 per cent.

The 2013 Human Development Report “The Rise of the South: Human Progress in a Diverse World” is instrumental in the context of Pakistan, especially given the challenges faced today due to poor policy choices that have been confronted in the report.

Meeting a small group of journalists here, Marc AndrĂ© Franche, UNDP Pakistan’s Country Director launched the report and said it is important for what it says and there are lessons to be learnt from countries with preconditions similar to Pakistan.


http://tribune.com.pk/story/527474/human-development-report-2013-the-rise-of-the-south-as-others-rise-pakistan-parks-the-bus/
Riaz Haq said…
Here's an excerpt of an Express Tribune blog on Musharraf's accomplishments:

1. Nine world class engineering universities were developed and 18 public universities further developed.

2. Pakistan was ranked third in world banking profitability.

3. The IT industry was valued at around $2 billion, including $1 billion in exports and employed around 90,000 professionals.

4. The CNG sector attracted over $70 billion in investment in the past five years and created 45,000 jobs.

5. The telecommunications sector attracted around $10 billion in investments and created over 1.3 million jobs.

6. Industrial parks were set up throughout the country for the first time.

7. Mega projects such as the Saindak, Rekodiq, marble production, coal production, mining and quarrying were pursued.

8. Foreign reserves increased from $700 million to $17 billion.

9. The Karachi stock market went from 700 points to 15,000 points.

10. The literacy rate improved by 11 per cent.

11. Poverty decreased by 10 per cent.

12. Four dams were built: Mirani, Subakzai, Gomalzam, Khurram, and Tangi,

13. Seven motorways were completed or were under construction,

14. Gwadar, an advanced sea port, was developed,

15. 650 kilometres of coastal highways were constructed.

16. A historic 100% increase in tax collection (amounting to Rs1 trillion) was observed.

17. Large scale manufacturing was at a 30-year high, and construction at a 17-year high.

18. Copper and gold deposits were found in Chagai, worth about $600 million annually if sold.

19. A new oil refinery with the UAE that could process 300,000 oil barrels a day was established.

20. The industrial sector registered 26 per cent growth.

21. The economy was the third fastest growing economy after China and India .

22. The Institute of Space Technology was established.

23. Sardar Bahadur Khan Women University Quetta was established.

24. The University of Science and Technology, Bannu, was established.

25. The University of Hazara was founded.

26. The Malakand University in Chakdara was established.

27. The University of Gujrat was established

28. The Virtual University of Pakistan was established

29. Sarhad University of IT in Peshawar was established

30. The National Law University in Islamabad was established

31. The Media University in Islamabad was established

32. University of Education in Lahore was established

33. Lasbela University of Marine Sciences, Baluchistan, was established

34. Baluchistan University of IT & Management, Quetta (2002)

35. The Pakistan economy was worth $ 160 billion in 2007

36. GDP Purchasing Power Parity (PPP) was $ 475.5 billion in 2007

37. The GDP per Capita in 2007 was $ 1000

38. Revenue collection in 2007/08 was Rs1.002 billion

39. Exports in 2007were worth $18.5 billion

40. Textile exports in 2007 were worth $11.2 billion

41. Foreign direct investment in 2007 was $8.5 billion

42. Debt servicing in 2007 was 26 per cent of the GDP

43. The poverty level in 2007 was 24 per cent

44. The literacy rate in 2007 was 53 per cent

45. Pakistan development programs in 2007 were valued at Rs520 billion

46. The Karachi stock exchange in 2007 was $70 billion at 15,000 points

47. Exports in 2007: $18.5 billion

48. Pakistan now has a total of 245,682 educational institutions in all categories, including 164,579 in the public sector and 81,103 in the private sector, according to the National Education Census (NEC-2005).

49. There are now more than 5,000 Pakistanis doing PhDs in foreign countries on scholarship. 300 Pakistanis receive PhD degrees every year, in 1999, the number was just 20.

50. In total, 99,319 educational institutions increased in Musharraf’s era!


http://blogs.tribune.com.pk/story/2092/50-reasons-pakistan-needs-musharraf/
Riaz Haq said…
Here's a Guardian story Sharif's decision to try Musharraf for treason:

The former military dictator Pervez Musharraf should be tried for high treason, Pakistan's prime minister said, raising the prospect of a serious clash between the country's civilian and military masters.

A treason trial would mark the first time in Pakistan's history that a military ruler has been held accountable, and the decision was cheered by many who believe the country's overweening army needs to accept the primacy of elected politicians.

The announcement by Nawaz Sharif, Pakistan's recently elected prime minister, ended months of speculation over whether the government would dare take on a former president and army chief who could face the death penalty if found guilty of overturning the country's constitution.

Only the government is able to try someone for treason, for which a special court would have to be established.

Although Musharraf is currently under house arrest and has negligible support in the country, many observers have long claimed the still powerful military elite would never allow a civilian court to try one of its former chiefs.

"Musharraf is still more popular in the army than [his successor General Ashfaq Parvez] Kayani," said a lawyer, Chaudry Faisal Fareed.

He said Sharif risked "opening a Pandora's Box" if the trial expanded to drag in other high-ranking officers.

Musharraf's actions amounted to high treason, Sharif told parliament on Monday , promising that the former dictator had to "answer for all his deeds in court".
--------
In the view of many lawyers, Musharraf is likely to be successful in defending himself against those charges, but treason charges are "an open and shut case", according to Fareed.

Talat Masood, a retired army officer, said a trial was inevitable given that Musharraf had alienated two of the country's most powerful men: Sharif, whom he toppled in a 1999 coup, and Iftikhar Muhammad Chaudhry, the activist chief justice who was the object of the then president's battle against senior judges in 2007.

"It's a gamble, no doubt about it," said Masood. "Sharif is taking a certain element of risk because the fight against militancy is the greatest challenge Pakistan faces right now and he needs the military for that."
---------
Many assume that even if the trial does go ahead, a political deal will be hatched to spare Musharraf's life, or even allow him to leave the country to live out his days in exile.

One possible scenario might see the intervention of Saudi Arabia, one of Pakistan's closest allies. Such an outcome would be rich in irony given that Sharif was given exile in the kingdom after he Musharraf deposed him.

Akhtar Hussain, a former vice-president of Pakistan's bar association, said it was likely Musharraf would ultimately receive a presidential pardon after a long legal process that is likely to stretch into 2014 and beyond.

Merely putting the former general on trial would mark an important milestone for Pakistan, he said. "The key thing is the initiation of the trial itself, which is very important for the standing of democratic institutions in this country. The result, whether acquitted or ultimately pardoned is a different matter."


http://www.guardian.co.uk/world/2013/jun/24/pervez-musharraf-treason-pakistan-prime-minister
Riaz Haq said…
Here’s some of what Nyhan found, according to Salon:

People who thought WMDs were found in Iraq believed that misinformation even more strongly when they were shown a news story correcting it.

People who thought George W. Bush banned all stem cell research kept thinking he did that even after they were shown an article saying that only some federally funded stem cell work was stopped.

People who said the economy was the most important issue to them, and who disapproved of Obama’s economic record, were shown a graph of nonfarm employment over the prior year – a rising line, adding about a million jobs. They were asked whether the number of people with jobs had gone up, down or stayed about the same. Many, looking straight at the graph, said down.
But if, before they were shown the graph, they were asked to write a few sentences about an experience that made them feel good about themselves, a significant number of them changed their minds about the economy. If you spend a few minutes affirming your self-worth, you’re more likely to say that the number of jobs increased.

In Kahan’s experiment, some people were asked to interpret a table of numbers about whether a skin cream reduced rashes, and some people were asked to interpret a different table – containing the same numbers – about whether a law banning private citizens from carrying concealed handguns reduced crime. Kahan found that when the numbers in the table conflicted with people’s positions on gun control, they couldn’t do the math right, though they could when the subject was skin cream. The bleakest finding was that the more advanced that people’s math skills were, the more likely it was that their political views, whether liberal or conservative, made them less able to solve the math problem.

I hate what this implies – not only about gun control, but also about other contentious issues, like climate change. I’m not completely ready to give up on the idea that disputes over facts can be resolved by evidence, but you have to admit that things aren’t looking so good for a reason. I keep hoping that one more photo of an iceberg the size of Manhattan calving off of Greenland, one more stretch of record-breaking heat and drought and fires, one more graph of how atmospheric carbon dioxide has risen in the past century, will do the trick. But what these studies of how our minds work suggest is that the political judgments we’ve already made are impervious to facts that contradict us.

Maybe climate change denial isn’t the right term; it implies a psychological disorder. Denial is business-as-usual for our brains. More and better facts don’t turn low-information voters into well-equipped citizens. It just makes them more committed to their misperceptions. In the entire history of the universe, no Fox News viewers ever changed their minds because some new data upended their thinking. When there’s a conflict between partisan beliefs and plain evidence, it’s the beliefs that win. The power of emotion over reason isn’t a bug in our human operating systems, it’s a feature.

http://www.salon.com/2013/09/17/the_most_depressing_discovery_about_the_brain_ever_partner/
Riaz Haq said…
Here's a WSJ story on Pakistan's return to bond market:

Pakistan is returning to the international bond markets for the first time in six years, joining a host of other emerging market governments and companies who are selling debt while borrowing costs remain low.

Pakistan's offering, expected to be up to $1 billion, comes as money flows back to Asia in search of higher yields amid new expectations that the U.S. Federal Reserve will now keep in place for the time being the aggressive stimulus measures that has pumped the world full of cash.

Other countries such as Brazil, Kenya and Honduras are also raising cash to fund infrastructure projects and alleviate heavy debt burdens.

Interest in emerging markets, including their sovereign debt, has been renewed in the past couple of months as the Fed has held off starting to wind down its bond-buying program, said Mr. Rajeev DeMello, head of Asia fixed income in Singapore at Schroders Investment Management, which manages $388 billion globally.

Mr. DeMello said Schroders holds Pakistani bonds and expects the new debt to attract investors, given that it will offer a high yield and that the country's bonds are not highly correlated to those of other markets in the region.

During the summer selloff in global emerging markets, prompted by expectations that the Fed would soon begin withdrawing its stimulus program, Pakistani bonds held up relatively well because most holders are large institutional investors with longer-term outlooks, Mr. DeMello said.

With global interest rates still low and emerging market investors venturing back into Asia, the country is planning to issue debt due in five to 10 years.

Bond yields throughout Asia have fallen over the last few weeks as investors have jumped back in. The yields on government bonds in Indonesia, Malaysia and Thailand have all fallen since early September.

Pakistan's five-year yield is at 12.3%.

"We have started the process [of the bond sale] and are waiting for the appointment of a lead adviser who will take the process forward," said Shafqat Jalil, a finance ministry spokesman.

Still, Pakistan isn't without its problems. Though its economy is humming, its finances are weak, with revenues from taxes floundering and foreign-exchange reserves falling 34% since October last year. Pakistan is already heavily in debt, with its financing needs one of the highest in emerging markets, according to the International Monetary Fund. Rating firm Moody's MCO +1.08% downgraded the country's government bonds to junk in July last year.

The Pakistani government is raising cash to plug its dwindling foreign-exchange reserves, which are symptomatic of the country's economic woes and trade imbalance.

The government's financial history hasn't been without blemishes, either. It last defaulted on debt in 1999 as it struggled with a balance-of-payments crisis aggravated by international sanctions and a military coup.

Pakistan last issued debt in 2007, with $750 million of 10-year bonds intended for general government spending and budget management. At the time, investors snapped up the bond with bids worth seven times the amount of debt on offer.


http://online.wsj.com/news/articles/SB10001424052702304391204579177021163516220

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