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Old Wednesday, December 01, 2010
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Our dereliction in Kurram

December 1st, 2010


According to a report published in a newspaper on November 30, the government has allowed a very dubious meeting between the elders of the Kurram Agency, members of the outlawed Tehreek-e-Taliban (TTP) and “foreign” agents of the Haqqani Group from North Waziristan. The meeting was held “in a guesthouse” in Islamabad and the objective was “restoration of peace in Parachinar (Kurram headquarters) which has remained cut off from the rest of country for three years.”

Who were the interlocutors? MNA Sajid Hussain Turi representing the Shia of Kurram and some elders, while the opposite side was represented by Qari Taj, the commander of the Haqqani Group in Kurram Agency, and Karim Mushtaq, TTP commander for Kurram and Orakzai agencies. Another MNA, Munir Khan Orakzai, also attended the meeting. The talks were fruitless because the Shia Turi side was not willing to give the right of way to the TTP and Haqqani group militants through their territory. In retaliation, the other side refused to lift the roadblock on Thall-Parachinar Road that cuts Kurram off from the rest of the country.

The Turis are in a bind. They can’t leave or enter their agency and have to use Afghanistan territory where they are at risk of being killed by pro-al Qaeda terrorists. Al Qaeda is not particularly fond of the Turis because they are Shia and because they did not allow al Qaeda leadership to stay on their soil after its escape from Tora Bora in 2001. Well-off Turis spend Rs8,000 on a plane ride from Peshawar to get home. The Agency is no longer under any semblance of federal government control for the last three years. And the Haqqani Group from Afghanistan, which is being allowed to hold talks with the Turis in Islamabad, has no business being in Pakistan.

Pakistan is projecting its power into Afghanistan on the basis of warriors who don’t belong to Pakistan and is giving them a status inside Pakistan that violates the sovereignty of the state. The TTP is dominant under the banner of anti-Shia feeling spread in the region by the Sipah-e-Sahaba, a banned terrorist organisation of Punjab which inspires the tribes that live around Kurram. Kurram lies next to the three Afghan provinces of Khost, Paktia, and Nangarhar. It has half a million inhabitants out of which around two-fifths are Shia — besides, the capital Parachinar has a majority Shia population. The agency lies next to Waziristan, Orakzai and Khyber agencies where warlords harbour severely sectarian feelings. Down the road from Kurram to Peshawar, cities like Kohat and Hangu have Shia communities cowering before the power of the Taliban for the last decade.

Kurram has had to run the gauntlet of the first TTP chief, Baitullah Mehsud, who sent his Waziristan lashkar there under the blood-thirsty Qari Hussain in 2007. Around 400 Mehsud and Wazir militants fought against the Shia in Kurram, burning down villages and killing dozens of them. Two months later, another warlord, Hakimullah Mehsud, sent hundreds of fighters to outnumber the Shia offering resistance to him. After becoming head of the TTP, Hakimullah appointed Mullah Noor Jamal from Orakzai, known as Mullah Toofan, to lead the Taliban. Mullah Toofan, a brutal commander, indulged in carnage and blocked the above-mentioned road, cutting Kurram from the rest of Pakistan. Infamous warlord Mangal Bagh of Khyber Agency, successfully challenging the Pakistan army, has also dipped his hands in the blood of the people of Kurram.

Pakistan’s military strategy focuses on a quest to control territories not part of its map, at the expense of territory it does have. The bulk of the Pakistan Army faces India on the eastern border. Because of Pakistan’s ambivalence towards the TTP and the Haqqani Group, it has had to suffer a gradual diminution of its writ in small cities like Kohat, Hangu and Bannu, while virtually losing control over the provincial capital, Peshawar. On the eve of America’s exit from Afghanistan, the focus is on how to prevent India from retaining its foothold there. It is difficult to imagine how territories lost inside Pakistan in the pursuit of this strategy will be regained.


SBP’s discount rate hike

December 1st, 2010


It appears that the battle between the finance ministry and the State Bank of Pakistan (SBP) is set to continue for some time now. For the second time in a row, the central bank used its monetary policy meeting to increase its benchmark discount rate — the rate at which commercial banks can borrow from the SBP — by half a percentage point. The rate now stands at 14 per cent, close to its 2008 crisis-level peak of 15 per cent.

Yet the central bank has been very blunt about why such a rate increase was necessary. Inflation has been spiralling out of control, largely due to over-borrowing by the federal government. The State Bank has a single over-riding mandate: to control inflation. Its single biggest tool in doing so is interest rates, which it has used somewhat timidly in the past but is now beginning to get more comfortable with. When inflation rises, the SBP raises interest rates in order to curb borrowing and slow down price rises.

The business community has been reasonably irked by the rise in the cost of borrowing. But they should realise that the central bank is simply responding to the constant depreciation in the value of the rupee that has been precipitated by unchecked government deficits. The government does not actually spend too much money, just much more than it takes in as revenues. Think of inflation, then, as an alternative to the taxes that nobody seems willing to pay. Unfortunately, this replacement for taxation has a tendency to hurt the poor infinitely more than it hurts the rich or even the upper middle class.

Economists have pointed out that the real interest rate in the country — the nominal interest rate minus the rate of inflation — is actually still negative. This means that in real terms, lending is still an unprofitable enterprise. Yet we acknowledge that even nominally high interest rates are damaging to the economy. The solution, however, is not to decry the central bank’s moves, which seems to be the default response of many commentators, but to support an increase in tax revenues, such as the reformed general sales tax bill currently in parliament. Only a balanced federal budget can guarantee manageable levels of inflation.
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