A worsening economic crisis in Pakistan is pushing millions more into poverty, and experts fear it will help Islamist extremists recruit converts.
The crisis began early this year, as democracy was restored after more than eight years of military rule. Now Pakistan's hard currency reserves have shrunk to $3.5 billion, and without an international rescue package, the key U.S. ally in the fight against al-Qaida is likely to default on foreign debt repayments in the next two months, economic experts say.
Inflation is at 25 percent, according to official figures, while electricity is in short supply, and Pakistan's currency, the rupee, has been devalued 25 percent against the dollar. Investor confidence is so low that Monday, police surrounded the Karachi Stock Exchange to protect it from angry investors. The Exchange had lobbied the government unsuccessfully to be allowed to close for two weeks.
Terrorist acts by Islamist insurgents have accelerated capital flight and discouraged foreign direct investment. Depositors are lined up at banks to withdraw their money or to send it abroad.
Never miss a local story.
“The canvas of terrorism is expanding by the minute,” said Faisal Saleh Hayat, a member of parliament and a former interior minister under Pervez Musharraf, the U.S.-backed former president. “It's not only ideological motivation. Put that together with economic deprivation and you have a ready-made force of Taliban, al-Qaida, whatever you want to call them. You will see suicide bombers churned out by the hundred.”
The prices of wheat, rice and milk have more than doubled in the past year. The price of flour used for roti bread, the food staple, has jumped from 12 rupees (15 cents) a kilo last year to 28 rupees (35 cents). Economists warn prices would spiral even higher if Pakistan defaulted on its foreign debt.
Before the crisis, an estimated 56 million Pakistanis, a third of the population, already lived below the poverty line, as measured by their daily caloric intake.
One direct impact of the economic slide is that the poor will have to rely increasingly on free education offered by madrassas, or Islamic schools, Hayat said. Islamic schools, some of which have been accused of inculcating children with extremism, also offer free food and clothing. Although most madrassas aren't radical, critics say they churn out pupils who are ill equipped to join the labor force.