U.S. Missile Strike Risks Being Last Straw for Crippled Pakistan

A series of upheavals in South Asia has set off a chain reaction that a growing number of middle-class and professional Pakistanis say is pushing this historically unstable country--now capable of building nuclear weapons--to the edge of political and economic chaos.

The U.S. missile strikes last week on neighboring Afghanistan sent the latest shock to a nation already straining from economic disintegration, an increasingly emboldened Islamic fundamentalist movement, and U.S. economic sanctions imposed when Pakistan, along with India, became one of the world’s two new nuclear powers.

“What you have is a slide into chaos,” said Maleeha Lodhi, a former ambassador to the United States and the editor of the News, a prominent English-language newspaper. “The economy is collapsing, the mainstream parties are discredited, and the extremists are gaining ground.”

The U.S. missile strike Thursday in Afghanistan has emboldened extremist Islamic groups--already heartened by the success of the fundamentalist Taliban movement there--and they have accused the government of Prime Minister Nawaz Sharif of cooperating with the U.S. military operation, which also targeted Sudan.

That criticism, combined with an economic situation that has rapidly disintegrated since the nuclear tests in May, has left Pakistan unsettled and on the verge of defaulting on its foreign debt.

The imploding economy is helping to push members of a precarious middle class--a bulwark of the nation’s stability--away from the two main political parties and toward radical Islamic groups, which advocate a repudiation of Pakistan’s foreign debt and the establishment of an Iranian-style theocracy.

“The people of this country are fed up with the two parties, and they are looking for a third option,” said Zafar Khan, who sells gun belts and leather goods at a bazaar here. “That could be the religious parties.”

U.S. Fears Sale of Nuclear Technology

That prospect is deeply troubling to U.S. leaders, who have led the effort to isolate Pakistan’s economy since the nuclear tests and whose missile attacks on Afghanistan across Pakistani territory exposed Sharif to virulent political criticism. They are concerned that a Pakistan in turmoil would be less able to control its nuclear arsenal and more likely to sell nuclear technology to other countries.

“An economic collapse could lead to a political crisis,” said Len Scensny, a spokesman for the State Department in Washington.

Many of the issues come to the table today in London when Deputy Secretary of State Strobe Talbott meets with top Pakistani officials in an effort to resolve the nuclear issues and allow for a lifting of U.S. sanctions.

Across Pakistan, the economic news worsens by the day. Since the nuclear tests in May, the prices of such basic goods as food and gasoline have shot up by as much as 25%. The Karachi Stock Exchange had lost 40% of its value before Thursday--and it dropped again after the missile strikes. The value of the rupee, Pakistan’s currency, has declined 30% against the dollar. Hard-currency reserves have fallen so low that Foreign Minister Sartaj Aziz has warned that Pakistan may be unable to continue servicing its $30-billion foreign debt.

Pakistani business leaders say the nuclear tests--coupled with the U.S. sanctions--punctured business confidence and led to the collapse of the currency and stocks. The U.S. sanctions prompted international agencies such as the International Monetary Fund and World Bank to suspend the flow of money from them that has long propped up Pakistan’s economy.

“No one envisioned what would happen after the nuclear tests,” said Nadeem Maqvi, head of research for International Asset Management Co. in Karachi, the country’s largest city. “If conditions continue to deteriorate, the moderate elements in our society will be increasingly marginalized, and it will be all too easy for the fanatics to rear their heads.”

As middle-class Pakistanis feel the squeeze, more people are calling for extreme measures to deal with the country’s economic woes. Some worry that the military, which has stepped in to civilian affairs often in the nation’s 51-year history, will feel tempted to do so again. Ultra-orthodox religious parties have begun demanding an end to the Sharif government and a repudiation of Pakistan’s foreign debt.

Earlier this month, Jamaat-i-Islami, a fundamentalist party that boasts 4 million members, announced that it was launching a campaign to oust the Sharif government. Jamiat-ul-Ulema, another religious party, has joined in.

“All the political forces are united against the government,” said Hafiz Hussain Ahmed, vice president of Jamiat-ul-Ulema. “We will make a revolution.”

The U.S. missile strikes last week and the recent victories by Taliban forces--who have seized key cities in northern Afghanistan, giving the fundamentalist movement control over most of that country--have further emboldened the anti-government forces.

The missile strikes sparked a torrent of anti-American rage--and widespread accusations that the Sharif government cooperated with the United States in launching the attacks. At demonstrations throughout Pakistan, marchers have denounced President Clinton and Sharif with equal fervor.

“Sharif is a slave of the United States,” Mohammed Arslam, a businessman, said last week at a protest march in Islamabad, the capital. “Anything U.S. wants, Sharif does.”

In addition, the recent run of victories by the Taliban--aided by the government of Pakistan--has rejuvenated the fundamentalists here. Religious schools in and around Peshawar were one of the breeding grounds for the Taliban movement, which in 1996 seized control of Kabul, the Afghan capital. Refugee camps along the border also helped spread the Taliban’s extreme form of Islam in Pakistan.

Fundamentalists Seen Filling Political Void

“Thank God [Osama] bin Laden is safe,” Habib-ur-Rehman, one of several Pakistanis wounded in the missile attacks in Afghanistan, told Associated Press, referring to the Saudi millionaire whom U.S. officials accuse of funding the terrorist network that exploded bombs in Kenya and Tanzania on Aug. 7. “The Taliban government is an exemplary Islamic government. That is why I went there, to live under them and see how they organize things.”

“Who will save Pakistan?” asked one placard carried at a protest march last week in Islamabad. “The Taliban!”

Political analysts say the fundamentalists are taking advantage of the collapsing economy and the near-total discrediting of the country’s two major political figures--Sharif and former Prime Minister Benazir Bhutto. The two for the most part have taken turns governing Pakistan since democracy was restored 10 years ago.

Sharif, a member of one of the handful of families that controls an overwhelming share of Pakistan’s wealth, is increasingly derided by the public and media, who accuse him of presiding over a corrupt government whose members are interested mainly in enriching themselves.

According to Newsline, one of Pakistan’s most respected magazines, Sharif owes about $25 million in unpaid taxes, and he and his family owe more than $2 billion in unpaid loans from state banks.

Bhutto, ousted from office in November 1996, was indicted earlier this month on corruption charges.

“The people have lost confidence in the system,” said Sardar Sher Baz Marzari, a former member of parliament. “The prospect of disintegration is very real.”

Pakistan’s troubles pose a dilemma for U.S. leaders, who have led the international effort to punish both Pakistan and India following the two nations’ nuclear tests.

The U.S. strategy is aimed at forcing India and Pakistan--bitter rivals with an active, bloody territorial dispute over the Kashmir region--to discontinue their nuclear weapons programs and forswear future tests. In exchange, the United States would drop economic sanctions and, along with other Western nations, allow the resumption of aid from agencies such as the World Bank and IMF. So far, the strategy has failed. U.S. sanctions remain in place. The Pakistani economy continues its downward spiral.

Sibtain Haider Sadat sells Western toiletries from a stand at Karachi’s Sunday bazaar. With the value of the rupee plummeting, the prices of such imported items as Head & Shoulders shampoo and Signal toothpaste have risen accordingly.

Since the nuclear tests, Sadat said, sales have fallen by half: “People can’t afford to buy anything.”

Uphill Struggle for Economic Reforms

In exchange for rescuing Pakistan’s economy, IMF officials say they will order the Sharif government to impose drastic reforms aimed at breaking up the nation’s feudal concentration of wealth and an elephantine bureaucracy that dominates many industries.

Yet many observers here point out that Sharif has already tried--and failed--to take such measures.

When he declared a state of emergency in May, Sharif vowed to step up the collection of income taxes, which are avoided by 99 out of every 100 Pakistanis, says Moinuddin Khan, chairman of the Central Board of Revenue. So far, there has been little success.

“I don’t pay taxes,” said Irfan Iqbal Puri, vice chairman of the Puri Group, a large Pakistani holding company. “Why should I pay taxes when I know the money will be sent out of the country by some corrupt politician and used to buy oceanfront property?”

Sharif also has launched a campaign to force repayment of defaulted loans, yet he concedes that he and his family owe large sums to Pakistani banks.

“One phone call by a politician,” Puri said, “and a loan is forgiven.”

Many observers predict that the prime minister won’t have the muscle to force the changes necessary to save the economy--or himself. With Bhutto discredited, they wonder whom Pakistanis will turn to.

“People are losing faith in the democratic system,” said Adeel Malik, an economist in Islamabad. “When the ballot box doesn’t work, people turn to the bullet.”