PAKISTAN`S political leadership, struggling to establish its writ at home and its credibility abroad, has been caught once again in the predicament of choosing among limited options to bring peace and prosperity to its increasingly restive population.

The transition towards a functioning democracy has been extremely slow and has failed to yield the promised dividends that people had hoped for before the elections.

The only glimmer of hope has been the successful, if somewhat anticlimactic, closure of the two-year lawyers` struggle to reinstate the chief justice. However, even there the unfinished business of tying some loose ends, such as the legality of some judicial appointments and the illegality of the Nov 3, 2007 emergency, cast a pall of uncertainty over the political and economic horizon.

The lifting of governor`s rule in Punjab — the federation`s pivotal component — has also had an ambivalent effect on the political atmospherics. The move did not completely clear the air that was thick with misgivings after the centre`s abortive attempt to keep the Sharif brothers away from the political arena and frustrate the long march.

Such a backdrop of half-hearted reconciliation and wishy-washy consensus is hardly enough to face some increasingly complex and daunting challenges. While the economy has been in a freefall for the past two years, it has recently been shifted to the IMF`s ICU ward in the hope that it will stabilise and become healthy enough to absorb the massive doses of external flows which the `Friends` (more appropriately `masters` as the title of Ayub Khan`s autobiography suggests) of Pakistan have promised to pump, once they receive indications as to the country`s ability and willingness to use them in keeping with the demands of the donors.

There is considerable hype about this aid, preceded by increased loans from the IMF to stabilise the economy to counter the ill-effects of global recession, which many see as a once in a lifetime opportunity to become a close ally of the US, such as Israel, Egypt and, in the Cold War years, Turkey. Mouth-watering visions of transforming Afghanistan and Pakistan into modern developed economies through a plan, involving over $50bn in aid (with more than half directed towards Pakistan) over a five-year period, are making the elites of these two countries — especially Pakistan`s — ecstatic and unmindful of the unrealistic nature of a daydream which could turn into a nightmare.At best, the forthcoming Tokyo meeting is expected to make a commitment of $4bn to $6bn as down payment for an increased Pakistani effort to prevent militancy from spilling over the border (with much less concern for what happens within Pakistan).

Neither the economics of the proposed Kerry-Lugar legislation, nor the political underpinnings of President Obama`s Afpak strategy, which fails to look beyond the narrow self-interests of the US and its Nato allies, is sufficient to make a significant contribution towards solving the manifold problems being faced by Pakistan and Afghanistan, including terrorism and religious extremism. The latter is a mere symptom of the more deep-seated problem of unequal development, which has been exacerbated by the rampant rise of globalisation, and not so much a manifestation of the national or religious psyche.

The $1.5bn annual economic aid promised by the US as a `carrot` translates into less than $10 per capita and only a third of the remittances Pakistani workers send each year, without seeking, unlike the US and IMF, any conditionality as a `stick`. As for the $20bn to $30bn aid being negotiated at the Tokyo meeting, a significant part is likely to be siphoned off by intermediaries such as bureaucrats, private contractors, consultants, administrators, communications and PR experts, as well as dubious NGO outfits. The rest is likely to be spent on hurriedly designed mega infrastructure projects, with major impact on elite incomes and comfort, and minimal impact on job creation, poverty reduction and human development. These projects will also serve as major conduits of corruption and rent-seeking that our political system thrives on.

As in the past, the relaxation of resource constraint will also induce fiscal and monetary ease and a reluctance to bite the bullet of such imperatives as an increase in tax-GDP ratio, rise in ratio of direct taxes, introduction of agricultural taxation, land redistribution, reduction in military expenditure and an increase in public expenditure on health and education. Unfortunately, this wish list in pursuit of an inclusive development strategy, on which a broad consensus exists, has awaited implementation for decades. The hope that the new political dispensation would take it more seriously than its predecessor is now fading as it pushes the country towards foreign aid and the debt trap once again.

The dilemma of Pakistani elites is that while they are eager to see the massive inflow of foreign aid, loans and investment to bolster the economy, they are unwilling to pay the price of firmly standing up against and taking ameliorative measures towards curbing the growth of terrorism, which requires both political courage and sagacity. Massive dependence on foreign aid can be avoided by mobilising our ample human, physical and financial (some stashed away and some legally held by Pakistanis abroad) resources, while terrorism can be overcome by uniting all political forces, including religious and nationalist parties, to take a firm stand against the menace, without compromising with foreign powers on national sovereignty and with centrist forces on regional autonomy.

At the same time, the military and the intelligence services also need to be reined in to observe the `red lines` of the constitutional provisions to respect civilian authority and to refrain from involvement in backing political agendas inherited from the past. A sovereign parliament should decide the parameters of the extent to which the country is willing to allow foreign powers to determine the contours of its economic and security policies, which the Pakistani state seems to have completely lost control over. This requires a much wider debate and broader consensus than has been possible so far.

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