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General Pervez Musharraf came to power on October 12, 1999, after he dismissed the Nawaz Sharif government. The former prime minister was later sentenced to life imprisonment and banned from holding public office for 21 years.

The crux of this government's contribution lies in beginning the process of institutional restructuring, financial reforms, documentation of the economy and restoration of investors' confidence. The flow of aid that had dried up completely after the 1998 nuclear tests has good chances of opening up once again. The situation for foreign aid is expected to become clearer in the middle of the current quarter when the first instalment of an IMF loan is expected to ease Pakistan's financial burden.

Till then, the government will have its hands full, juggling several conflicting tasks including stabilising the rupee without spiraling inflation, fine-tuning the monetary policy without frightening away the newly revived investor and resolving the highly charged issues of CTBT and Kashmir without alienating the national consensus.

''The regime is still struggling to defend its existence. The West and emerging countries like Bangladesh are criticising the military rulers for throwing out an elected government,'' said Arshad Arif, an economist at ABN Amro Equities in Karachi. ''The biggest issue of multilateral agencies' support is still very much unclear. Though the regime has started implementing its ambitious reform agenda very religiously, the focus to date has been only on lip service and rhetorics,'' Arif said.

''Pakistan remains dependent on foreign donors and creditors to meet its financial needs. Even with the assistance of international financial institutions, the country has run a current account deficit in recent years,'' said William B Milam, the US ambassador to Pakistan.

"Both annual debt servicing requirements and the current account deficit have hovered around three per cent of the gross domestic product in recent years, while the gross external public debt is over 50 per cent of the GDP. In addition, defense spending and debt repayments absorb close to 80 per cent of current expenditures," Milam said.

''Hostilities between nuclear-capable India and Pakistan, who have fought three wars since gaining independence in 1947, is a major problem for investors,'' said A R Kamal, director at the Pakistan Institute of Development Economics in Lahore. "Pakistan received $ 531 million worth of foreign investment in 1999-2000 compared with $ 507 million of 1998-1999. The perception of investors was hit hard by a bitter dispute with the independent power producers, a major source of direct investment between 1996 and 1998," he said.

In 1999-2000, Pakistan's economy grew by 4.9 per cent compared to the growth rate of 3.2 percent a year ago. The military government has set a target of 5 per cent in the year ending June based on an improvement in cotton, wheat and rice production and growth in the industrial and manufacturing sectors.

''But the rise in oil prices by 40 per cent during the military government's reign and the depreciation of the rupee by 13 per cent might cut the growth in the industrial sector,'' says Mohammad Sohail, research head of Invest Capital Securities in Karachi.

The general reaction to the price hike was very tame, as neither the various public fora nor the political parities have come up with any significant criticism. Continuous mismanagement at the hands of democratic as well as military rulers have pushed us to a stage where everybody is just trying to match his expenses by hook or by crook, this was the feeling of most of the consumers, traders and dealers in Karachi.

The military government received tough resistance from small businessmen and shopkeepers following the imposition of general sales tax on the retail sector. Shops and main business centres were closed for over a fortnight. The issue was later resolved as the government accepted some of the conditions.

''The documentation of the economy helped and to generate revenue, the government launched a tax survey against the black economy which accelerated the flight of capital from the country,'' an analyst said.

Exact numbers are difficult to assess, but a leading owner of a departmental store located in the posh Mohammad Hashim area said housewives from the elite class have curtailed their buying due to fear of investigation. ''My sales since the last six months have dropped by at least by 25 to 30 per cent, thus reducing my profits which in turn forced me to sack two or three workers from the store,'' he said.

Such moves add to the unemployment ratio in the country where in a week, an average of two or three youngsters commit suicide because they remained jobless for several years despite being degree holders. ''The stock market reached the 2000 level in February due to a good cotton crop, the government's plan to privatise state-run companies and the assurance to resolve the tariff dispute with Hubco,'' said Arif Habib, chairman, Karachi Stock Exchange.

"The government is likely to raise $ 4 billion to sell off state-run companies like Pakistan Telecommunication Co, Karachi Electric Supply Co, Pakistan State Oil Co, Sui Southern Gas Co, etc," he said.

"The stockmarket fell as the dispute with the power companies lingered and Pakistan did not get any fresh loans from the IMF and the World Bank for the last year," said Saad Hashmey of IP Securities.

''Basically, the military inherited an economy entrenched in a yawning trade deficit, a huge foreign debt, institutional weakness, financial inefficiency and an artificially propped up rupee,'' said Humaira Jamil, research analyst at Harvest Smartrend Securities in Lahore. ''At this point in time, it is difficult to put the label of 'success' or 'failure' on the government's performance as the implementation of the ambitious economic plan has just begun and the economy is standing at the crossroads from where it can go either way," she said.

''Only time will tell. Meeting the IMF's pre-conditions have positioned Pakistan for renewed lending from the IMF and other donor agencies, setting the stage for possible Paris Club rescheduling,'' Milam said.

"This is a start, and it could be the beginning of sustained efforts at economic reform and restructuring that will attract both increased domestic investment and private capital inflows/foreign investment. The challenge at present is to begin the journey and stay on the road," he said.

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