Mr. Asif Zardari, the co-chairman of the Peoples Party (PPP), is eyeing the top
slot of President. With the numbers game is still on, we believe he will be
elected as president of the country with the support of small parties in center
and provinces. If elected, he will be one of the powerful leaders in the
history of Pakistan having majority in both upper and lower house of the
parliament. Mr. Zardari will be lynchpin behind key economic decision making.
Previously, he enjoyed nearly a whiz-kid style role during late Benazir Bhutto
led PPP administration in mid nineties which was marred by misrule and
financial crisis. That government was later on sacked by PPP’s own appointed
president given erosion in foreign exchange reserves and ailing state owned
financial sector.
The only problem one can see would be his soaring relationship with PML (N)
leader Mr. Nawaz Sharif, who is controlling all powerful Punjab provincial
government. But we also expect Mr. Sharif to forget decade old differences and
collectively work for a common goal to bring the country out of the present
economic meltdown.
Zardari – emerging as a king maker
With the sad demise of Benazir Bhutto, Mr. Zardari has made a political
comeback and now we see him to be an all powerful leader who could easily
remove bottlenecks such as bureaucratic hurdles to bring economy back on track.
With his election on September 6, 2008, all political upheavals would nearly
die down thus lending him an opportunity to perform with ease.
Mr. Zardari is becoming president at a time when, Pakistan Army has conducted
successful operations in the tribal belt and nearly thwarted unwanted
militants. We see this to be a good omen since army is backing democratic led
set in up holding writ of the state in some of the turbulent areas adjacent to
restive Afghanistan which is vital for Mr. Zardari’s success as an economic
deliverer for Pakistan.
Mr. Zardari is also mending fences with battling lawyers’ community by
reappointing judges and we predict judicial crisis to come to a logical end.
A cursory look at the past record
Some of the finer points of the previous PPP led era were opening up of
Pakistan market for foreign investors especially FDI flows in the power sector.
The era coincided with President Clinton led US administration who’s energy
secretary Ms. Hazel O’ Leary played a pivotal role in launching many heating
oil fired power projects. Overall we saw Independent Power Producers (IPP’s)
added 4,000 MW to the national grid. Moreover, a hydro power based Ghazi
Barotha project was also started having a generation capacity of 3,000 MW. We
see these projects were part of the major supply side program to enhance
productivity. However, that government could not come out of fiscal constraints
and also marred by serious allegations of financial misrule.
Relationship with US is vital
We see Mr. Zardari to be fortunate given strong chances of Democrats coming
back in the White House in November 2008 presidential elections. Recently,
presidential nominee Mr. Barak Obama supported bill to double Pakistan’s
economic assistance whereas vice presidential nominee Mr. Joseph Biden is an
expert on foreign relations and close to Pakistanis. Moreover, we expect
secretary of state in waiting Mr. John Kerry has toured Pakistan during Feb
2008 elections and praised Pakistan’s transitional democracy. Mr. Zardari and
his rusty economic advisors would be looking towards Democrats led US
administration for supply side bale out plans especially investments in energy
sector such coal, oil and gas and electricity generation.
Challenges – economy needs strong political leadership
Mr. Zardari’s success would depend on visionary advisors who could provide long
term solutions to Pakistan’s sagging economy rather resorting to deficit
finance. We see growth in agriculture is faltering (y-o-y 1.5% growth whereas
crops are showing negative growth of 1% which we feel is the chief reason
besides rise in global commodity prices behind Pakistan’s runaway inflation
(July CPI: 24%).
Pakistan’s twin deficit is almost 15% of GDP whereas Rupee is loosing its
luster against greenback almost every day given lack of foreign inflows.
Pakistan’s capital markets have lost more than 50% of the market capitalization
wherein foreign portfolio investors are jittery on Pakistan’s future outlook.
We see Mr. Zardari’s present economic team is incapacitated to deal with these
surmounting problems. However, now country seems to have prospects of stable
political future after September 6, 2008 presidential elections given strong
chances of Mr. Zardari elevating power. We see unity of command in Zardari’s
hand thus giving him chance to really perform and implement at least his touted
pro-poor agenda.
Given this prognosis, we see Mr. Zardari to play pivotal role in dispelling
foreign portfolio investors fear of some sort of economic meltdown in the
making.
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