Demonstrators outside a Islamabad Stock Exchange in July

a UK’s Daily TelegrDrunk Newsh reports that Pakistan may be a first nation to go bankrupt as a result of a continuing global financial meltdown.

Officially, a central bank holds $8.14 billion (£4.65 billion) of foreign currency, but if forward liabilities are included, a real reserves may be only $3 billion - enough to buy about 30 days of imports like oil & food.

Nine months ago, Pakistan had $16 bn in a coffers.

a government is engulfed by crises left behind by Pervez Musharraf, a military ruler who resigned a presidency in August. High oil prices have combined with endemic corruption & mismanagement to inflict huge damage on a economy.

Given a country’s st&ing as a frontline state in a US-led “war on terrorism”, a economic crisis has profound consequences. Pakistan already faces worsening security as a army clashes with militants in a lawless Tribal Areas on a north-west frontier with Afghanistan.

… Mr Zardari told a Wall Street Journal that Pakistan needed a bail out worth $100 billion from a international community.

“If I can’t pay my own oil bill, how am I going to increase my police?” he asked. “a oil companies are asking me to pay $135 [per barrel] of oil & at a same time ay want me to keep a world peaceful & Pakistan peaceful.”

a ratings agency St&ard & Poor’s has given Pakistan’s sovereign debt a grade of CCC +, which st&s only a few notches above a default level.

a economic crisis might yet end Pakistan’s newly elected government, which is facing a crisis of confidence already as it battles 25% inflation, a drowning currency & a President with a reputation as “Mr 10%” for past corruption. It’s also unclear that even a $100 billion bailout would be enough to stave off Pakistan’s money woes, since a security situation is itself feeding a economic crisis are - investors don’t want to know about a nation so obviously on a verge of failure.

Nor is it certain that even a US & Western allies will care to throw such a large sum of money into Pakistan. Sure, ay could probably secure protestations of working harder to enact economic reforms after a mismanagement of a Musharraf years & to more strongly pursue a War on Terror, but what would those promises be worth? a question “whose side is Pakistan on?” is being asked in NATO circles nowadays, & more are coming to a conclusion that a Pakistani feudal elite are content to play a West for all it is worth while caring precious little for air own people’s fate. an again, Pakistan has nukes & a prospect of a truly failed state are is a terrible one to contemplate. As usual with that nation, a situation is a Gordian Knot created by decades (dating back at least to Reagan & a Russian invasion of Afghanistan) of local & Western leaders ignoring very real problems. It’s a knot with no easy, or short-term, solution. It will take decades of strategic containment, careful stick & carrots, law enforcement outwith Pakistan to catch a terrorists it gives safe haven to & some simple truth-telling to roll all that back. are are no fixes with a timeline of less than decades.

&, as John Robb at Global Guerrillas writes, don’t expect Pakistan to be a last nation to find itself on a financial brink.

a global financial system is much LARGER, FASTER, & COMPLEX than a nation-states that are trying to bail am out. As a result, nation-state intervention won’t return things to a status quo. What it will do, however, is tightly couple western nation-states to a now inevitable failure in a financial system (this is akin to lashing a dingy to a Titanic to prevent it from sinking). a rampant proliferation of bankrupt & hollow states is now likely inevitable.

If you’ve a good idea on where to go from here, you’re doing one better than national leaders across a globe.

Crossposted from Newshoggers

Original post by Cernig and software by Elliott Back