India, bail out Pakistan

[Intelligent lad]

Asif Ali Zardari recently went around the neighbourhood, knocking on doors, begging bowl in hand. Pakistan is almost out of money. It only has $ 3 to 4 billion in foreign currency, enough to last it till the end of this month. It needs another $ 5 billion to last it till June 2009. It is already in $ 44.5 billion of debt. If it doesn’t get any money, it will have a currency crisis and will be unable to buy oil or food. Inflation is 25 per cent. The Pakistani rupee is already more than 80 per dollar.

So Zardari put on a sad face and knocked on Beijing’s door. “Ah, our all-weather friend, come in,” the Chinese said. Zardari put out his palm: “You have nearly $ 2 trillion in your cupboard”. They offered him tea. The world is in an economic crisis with no end in sight, they said. Why, we’re putting $ 586 billion to keep our own economy ticking.

You should sell your Surrey mansion, they advised him. You’d better pray terrorists don’t kill any more Chinese engineers, Zardari replied. Have a fortune cookie, the hosts said as they ushered him out the door.

Zardari next rang Riyadh’s doorbell, certain that the House of Saud would not turn down a brother Muslim. King Abdullah did not even come to the door. “Just let me defer payments on oil,” Zardari told the menacing servant blocking the doorway. “We have only ten days worth of oil, and there are long lines at the petrol pumps.” The servant said that a royal prince or two might talk to Zardari in a few months, perhaps after Pakistan gave them prime lands for hunting houbara bustards with their super-bred falcons.

Maybe then they would talk money, he said while gently shutting the door in Zardari’s face.

Zardari thought of the big USA ranch down the road. At first he misread the sign that said ‘Obama Biden’. But no one answered the door. Probably no one was at home; perhaps they were out, bombing his backyard as usual. Thank God! His encounter with Sarah Palin must have irked Joethe- Biden; better to avoid him for some time.

To think that once upon a time, the Americans would visit that very same backyard for a barbeque, while Soviet soldiers were skinned alive by holy warriors. How times change. Sigh.

Zardari reluctantly headed to the sinister mansion at the dark end of the street, the International Monetary Fund. The IMF would demand its pound of flesh. It would force Pakistan to raise taxes and lower government spending. Zardari last month raised electricity tariffs, but in country-wide protests, citizens burnt their electricity bills on the streets. And this Wednesday, while the rest of the world has been cutting interest rates to make money cheaper, the IMF forced the State Bank of Pakistan to raise its interest rate by two per cent. The worst part, however, would be an IMF demand to cut defence spending. That would spell suicide for any civilian government in Pakistan.

Yet Zardari had little choice, and began negotiations with the IMF. Maybe he could buy time till the coming Monday, when the Friends of Pakistan— UK, France, China, USA and Germany, among others — would meet in Abu Dhabi to talk about giving Pakistan some money. China said it would give $ 500 million to get things going. Peanuts.

In any case, the place that the army told Zardari to avoid at all costs was the house next door. It’s a house that of late was looking kind of nice. There were lots of renovations, luxuries, comforts, technological innovations and other cool stuff going on over there. Sometimes there were noisy quarrels, and regular tragedies both natural and manmade, but the house stood strongly and seemed inviting. Also, Aishwarya Rai lived there. Zardari often felt like a boy whose mother had forbidden him to go to the neighbour’s house to play with some wonderful toys.

That house is India, and you have to wonder why we wait for Zardari to come here – why don’t we call him over, and simply offer him some cash? After all, India built up a foreign currency reserve that peaked at $ 316 billion this May. The financial crisis has hit those reserves; with credit frozen in western financial markets, people pulled their dollars from all corners of the world, including India.

The rupee started to fall (it is now around 48 per dollar). To keep it from falling hard, the Reserve Bank of India has been selling dollars from our reserves. So in the six weeks before November 1, the reserves fell; in the week of October 24 alone, they emptied by $ 15.5 billion.

Our reserves stood at $ 253 billion on November 1; still pretty healthy, though there is pressure on the reserves from Indian industrialists who were on a foreign buying spree the last few years. We will need the cash in the coming days for oil and for food – for a real food crisis looms around the corner – but we can perhaps spare cash for our next door neighbour, who needs $ 10 billion till June 2010 to keep from defaulting on debts.

I know, I know: many of you think that our Prime Minister has better things to do, like go to the G-20 meeting in Washington today and convince the world community to change the global financial architecture.

This is laughable. Of course it needs to be changed —why should Belgium have the same voting power at the World Bank as China or India? But it is like changing the UN — nobody cedes power voluntarily. The world will probably have to hit a depression before a true transfer of power is forced.

Before that, ‘Bretton Woods 2’ will sound more like an American film sequel than anything else.

What does India get out of helping Pakistan which, many feel, foments terrorism around the country and separatism in Kashmir? For decades, the security establishment has repeatedly confided that Indira Gandhi did not exercise the option of further dismembering Pakistan because it was not in India’s interests. If so, seeing Pakistan fail is not in India’s interests. India’s interest is to see the army stay in its barracks in Rawalpindi, and a civilian government stay in power in Islamabad.

Putting a few dollars in its begging bowl won’t change any fundamentals in Pakistan’s policies ($ 10 billion since 9/11 didn’t help the Americans); it won’t give Delhi a say in how they spend their money, how they conduct their foreign policy, how they manage their defence. And India should not seek such things.

A country that seeks to change the global financial order to its advantage has to be seen as responsible. If we can’t help Pakistan, do we have the credibility to ask for the reform of the G-7, the IMF or even the UN? A country that can’t take care of its neighbourhood can’t demand a seat at the high table. And besides, helping our neighbours save face will help us in unforeseeable ways in the years to come
http://www.expressbuzz.com/edition/story.aspx?Title=India,+bail+out+Pakistan&artid=tLcwdgG|qHw=&SectionID=d16Fdk4iJhE=&MainSectionID=HuSUEmcGnyc=&SectionName=aVlZZy44Xq0bJKAA84nwcg==&SEO=
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ISLAM IS THE CANCER,FFI IS THE ANSWER...

[yeezevee]

[Ram]