Pakistan is to be shunned.

In an interview on WSJ.com, Mr Yaseen Anwar, the Governor of the State Bank of Pakistan admitted that his job is difficult. The growth rate has dropped to 3% and inflation already at 11% is expected to rise further. Interest rate is at 12% and the Pakistani rupee is 92 to the dollar. Foreign Direct Investment has fallen from $8 billion a few years ago to $500 million last fiscal. Foreign reserves are down to $8 billion, equivalent to 2 months import bill. Remittance by non resident Pakistanis has increased 20% to $13 billion/year. Tax to GDP ratio at 9% is among the lowest in the world but instead of trying to increase the tax base the government has borrowed Pak Rs 442 billion from the central bank, forcing it to print money. The IMF ended a loan program last year after disbursing $8 billion of previously agreed $11 billion because of the government's refusal to reduce deficit. Repayments of loans have already begun and another $4 billion of repayment of IMF loans will become due this fiscal, starting in July. Pakistan will certainly need more loans from the IMF but will have to agree to tough terms. But can it? The army is a huge gorilla on the back of the government and will refuse any reduction in its budget. Pakistanis have been brain washed since birth to believe that India is an enemy dominated by Hindu kafirs and hence must be destroyed. A huge military machine is justified in the minds of the public to maintain parity and an expanding nuclear arsenal is a matter of national pride. Military officials, politicians and business people pay little tax and the government lacks the will or the power to force them to pay. There is, therefore, no hope of containing government spending and the growing deficit. Population growth is 2.03% which is among the highest in the world. The population has grown 57.2% between 1990 and 2009 and is at 177.1 million. It is expected to double by 2045. As the numbers of the poor increase they are easy recruiting grounds for the various terrorist organisations. Terrorism may be the reason why FDI has fallen drastically and Pakistan has probably lost more than $60 billion due to terrorism alone. Army brass think that they are very clever in breeding terrorists to be used in an asymmetrical war against India and to take over Afghanistan once US and NATO forces leave. But as the Farc in Colombia, the Shining Path in Peru and the Naxals in India have shown a terrorist group starts with ideology but soon converts to violent crimes such as bank robbery and drug trafficking to finance itself. Thus terrorists in Pakistan will resist any control from the army. Given such a bleak picture it is incomprehensible why Pakistan is picking a confrontation with the US given that it is surviving on US aid. It may be thinking that it is too valuable an ally for the US to cut off or it may be calculating on earning vast sums of money by controlling the transport of gas from central Asian countries such as Uzbekistan and Tajikistan through Afghanistan. Pakistan is, therefore, highly unstable and could explode any day. Should we not maintain an great distance form this disaster?