Though economists believe Musharraf's military government has done enough to win a resumption of vital International Monetary Fund (IMF) aid, the country's list of economic problems remains long and formidable. A week ago, Finance Minister Shaukat Aziz announced a $3.5 billion bailout package from the IMF to help keep Pakistan from defaulting on foreign debt repayment.

However, final approval from IMF is still awaited. "This could be a turning point for Pakistan's economy because it is seen as validating the country's policies and building investor confidence," Aziz said about the deal.

The finance minister is not far from the truth. The economic policies of the Musharraf government have focused on meeting the IMF conditions. Moving without any political considerations, the government has been able to meet almost all the demands of the IMF. Still, there have been three other areas of concern - inflow for forex reserves, debt retirement and a fiscal deficit targeted below 4.6 per cent.

These problems, the government hopes, can be taken care of once the bailout package is received. Without any assistance through international financial institutions for the last 15 months, the State Bank of Pakistan injected $1.6 billion in the forex reserves by purchasing dollars from the market.

However, the reserves still dwindled to $660 million in September. "The military government, in its one year rule, has disappointed everybody," said Anwar Wahidi, an economist who worked with the Benazir Bhutto government as consultant. "Price hike, downsizing, new taxes and economic inertia are some of the major problems," he said.

"Like all other leaders, Musharraf has forgotten the promises he made to the nation and has left them at the mercy of the infamous donors (IMF and World Bank)," Wahidi said. Musharraf had pledged to minimize the mounting external debt burden but his government is pursuing loans from donors more vigorously than his predecessors, he added.

During the past few months, the Musharraf regime has increased prices of gas, electricity, petrol, telephone and public transport, approved downsizing of public entities, imposed a general sales tax on the services sector and turnover tax at the retail stage, Wahidi said.

All these IMF-dictated measures have increased prices of essential consumer items. "This has opened a new chapter of misery and hardship for the people," Wahidi said, adding that traders throughout the country protested the levy of new taxes but Musharraf refused to retreat. For several years now, the IMF has been insisting on such strict measures but the governments of Bhutto and Sharif had stalled them, Wahidi said. "They knew that the IMF strategy would make life hard for the common man and also cripple the economy," he added.

A World Bank report said Pakistans gross domestic product (GDP) grew only 2.7 per cent last year, barely beating the 2.6 per cent rise in population.

Per capita GDP stood at an annual $450, with 85 per cent of people living on less than $2 a day. At least 55 per cent of those over the age of 15 were illiterate and the infant mortality rate was 91 per 1,000 births - more than 10 times the rate of developed countries.

Pakistan spent only 2.7 per cent of its GDP on education and less than one per cent on health. It spent four per cent of GDP on the army, five per cent on the civil service and seven per cent to service its debt, the report said.

(India Abroad News Service)