Riddle Me This

What do you get when you combine high oil prices, government subsidies on gasoline, and a financial crisis spreading around the world?

You get Pakistan on the brink of insolvency:

Officially, the central bank holds $8.14 billion (£4.65 billion) of foreign currency, but if forward liabilities are included, the real reserves may be only $3 billion – enough to buy about 30 days of imports like oil and food.

Nine months ago, Pakistan had $16 bn in the coffers.

The government is engulfed by crises left behind by Pervez Musharraf, the military ruler who resigned the presidency in August. High oil prices have combined with endemic corruption and mismanagement to inflict huge damage on the economy.

Given the country’s standing as a frontline state in the US-led “war on terrorism”, the economic crisis has profound consequences. Pakistan already faces worsening security as the army clashes with militants in the lawless Tribal Areas on the north-west frontier with Afghanistan.


The Pakistan rupee has lost more than 21 per cent of its value so far this year and inflation now runs at 25 per cent. The rise in world prices has driven up Pakistan’s food and oil bill by a third since 2007.

Efforts to defer payment for 100,000 barrels of oil supplied every day by Saudi Arabia have not yet yielded results, while the government has also failed to raise loans on favourable terms from “friendly countries”.

Mr Zardari told the Wall Street Journal that Pakistan needed a bail out worth $100 billion from the international community.

If there’s one thing that would be worse than a Pakistan speaking out of both sides of its mouth on the subject of the terrorists it’s playing host to, on the one hand proclaiming that it’s our ally in the War on Terror while on the other shielding Al Qaeda and the Taliban in the FATA who are crossing the border into Afghanistan to attack NATO forces, it would be a Pakistani government that has collapsed. It isn’t unheard of for governments in such a position to foment a war just to bolster domestic support and have somebody else to blame.

Hat tip: fester at Newshoggers

FILED UNDER: Terrorism, The Presidency, Uncategorized, , , , , , , , , , , , , ,
Dave Schuler
About Dave Schuler
Over the years Dave Schuler has worked as a martial arts instructor, a handyman, a musician, a cook, and a translator. He's owned his own company for the last thirty years and has a post-graduate degree in his field. He comes from a family of politicians, teachers, and vaudeville entertainers. All-in-all a pretty good preparation for blogging. He has contributed to OTB since November 2006 but mostly writes at his own blog, The Glittering Eye, which he started in March 2004.


  1. Alex Knapp says:


    What’s your take on the rumors that the Taliban has made overtures to separate themselves from al-Qaeda and negotiate a deal with Karzai’s government?

  2. Dave Schuler says:

    I was thinking of posting on that, Alex. In the long term it’s an important development. Yet another group of hosts with which the Al Qaeda Salafists have outworn their welcome.

    In the short term I’m not sure it makes a great deal of difference. The analogy with Iraq is not a good one. The Awakening movements function within the largely urban Iraq.

    Afghanistan is larger than Iraq, wilder, and much more rural. The same is true of the adjoining areas of Pakistan. Al Qaeda will be able to keep the shop open there for a long, long time.

  3. ankit says:

    Good Numbers to bring out the plight of Pakistan economy.But,i dont think it is the lone country on the brink of financial destruction.
    When the US of A cries ,the whole world weeps too.
    pakistan though as rightly pointed out by you,has many other problems too to take care of.
    But,then nothin much can be expected when “people cant choose their own leaders”