Osama has strengthened our external sector while the internal sector has somehow gone the other way. Thanks to Osama, we couldn't have improved our external sector on our own. Making things worse is what we do best.

On the external front, there has been some debt relief and a lot of debt 're-profiling'. Cash grants, since September 11, have amounted to some $800 million. Pakistani expatriates sent in an additional $800 million.

Inflow of dollars into our treasury has gone up substantially. Oil prices went down and the government saved half a billion dollars. Paris Club was more generous than ever. Our entire stock of debt was re-scheduled. The Net Present Value (NPV) of our accumulated debt stock must have gone down by a hefty $3 billion to $4 billion.

As a consequence, the treasury is now sitting on over $5 billion covering some 18 weeks of imports. That hasn't happened for quite a while. SBP has also curtailed its dollar purchases from the kerb market (although continues to buy dollars from the interbank). For the first time over the past two decades the rupee has actually gained against the mighty dollar on a rather sustained basis. Since September 11, rupee in the kerb has gone up by 11%.

Balance of trade has never been better either. The final deficit may come in at less than a billion dollars compared to more than $3 billion in the mid-90s and $2 billion in the late-90s. Balance of payment situation is quite comfortable. Contrary to common perception, our national debt - external plus internal - has actually increased from Rs 3.2 trillion when the military government took over to a current figure of close to Rs 4 trillion; a 25% jump.

On the internal front, a majority of sectors contributing to our GDP have, however, contracted. Real GDP growth may, therefore, come in at no more than 2.5% a full 25% lower than earlier targets. Real per capita GDP shrank.

Outside of agriculture, sectors that continue to be under pressure include food, beverage and tobacco, automobile, non-metallic mineral products and basic metal industries. Sectors showing positive growth include paper and board, chemicals and rubber and plastic. Agriculture, on the heels of a severe water shortage in at least 50 out of 106 districts, may actually show a negative growth. Tax collection target would have to be slashed once again.

Going into the future, a dismal private sector debt growth (rupees borrowed by the private sector) means that the contractionary cycle still has life left in it. Industrial consumption of lubricants is down and that means a slowdown in industrial activity. Even more worrisome is the persistent deterioration in gross investment over the past decade. As a percentage of GDP, gross investment peaked at 21% of GDP in 1993 and has since declined to under 15% of GDP. Continued tension on the border is sucking in more resources than the original defence allocation of Rs 157 billion. Internal budgetary deficit is sure to worsen to may be over 6% of GDP a good 20% worse than earlier expectations.

On the inflation front, the official rate (CPI) has been in the single digit since 1998. It saw a low of 3.6% in 2000 but has since spiked up to 5%. Unofficial rate calculations have higher figures but the price spiral of previous decades has certainly been tamed.

To be certain, no one outside of the Chief Executive Secretariat is looking at Pakistan as a potential investment destination. Yes, the oil and gas sector is busy and there's a dozen multinationals -- including British Gas, Lasmo, OMV, UTP, Shell, Premier, BHP, UMC, Tullow and Unocal -- actively looking for oil and gas. That could mean Foreign Direct Investment of half a billion dollars. Portfolio investment (buying of Pakistani shares by foreigners) just last month turned slightly positive after being in the negative for the past couple of years. Outside of oil and gas we have a whole web of dead ends.

What we continue to lack is security, certainty, predictability and trust; four factors without which foreigners are not going to invest. What we have in abundance is uncertainty. Uncertainty in economic policy. Uncertainty of a political future. Uncertainty in taxation. Uncertainty whether the government will fulfil its commitments. Uncertainty whether profits would be allowed to be repatriated.

The worst of all is the fact that our structural imbalances are firmly intact. Almost all the factors responsible for bringing our economy down to its knees, in the first place, haven't budged a bit. To begin with, gross misallocation of resources with a strong defence bias continues. Secondly, the government continues to be a net dis-saver. Thirdly, the public sector continues to be a major player in the country's productive sector grossly mismanaging - and losing Rs 150 billion a year - through a whole host of companies. These include Wapda, KESC, PIA, Pakistan Railways, Pak Steel, HBL, UBL, NBP, ADBP, NDFC, IDBP, PICIC, ICP, NIT, SSGC, SNGPL, OGDC, National Refinery, Ghee Corporation, PNSC, State Cement, Commodity Credit Corporation, House Building Finance Corporation, Iran-Pak Industries, Pakistan Industrial Development Corporation (PIDC), National Tubewell Construction Corporation, PTV, State Life, State Engineering, Karachi Port Trust, National Fertilizer Corporation, Pakistan Automobile Corporation, Pakistan Agriculture Storage and Services Corporation, Pakistan Broadcasting Corporation, Pakistan Insurance Corporation and Utility Stores Corporation.

On top of the government getting its hand dirty into each and every business in the country, we have our uniformed entrepreneurs. Fauji Foundation, controlled by the Ministry of Defence, has at least 11 projects ranging from Fauji Cereal, Fauji Sugar, Fauji Cement, Fauji Poly Propylene, Mari Gas and Fauji Kabirwala Power Company. Then there is the Army Welfare Trust (AWT), which comes under the Army GHQ. AWT has some two dozen projects going, including Askari Stud Farms, Askari Fish Farm, Army Welfare Shoe Project, Commercial Plazas, Askari Guards, Askari Aviation and three Travel Agencies. Shaheen Foundation, controlled by the Air HQ, has a dozen projects including Shaheen Pay TV, Shaheen Aerotraders, Shaheen Knitwear and FM-100. Bahria Foundation, that comes under the Naval HQ, has 19 projects. Bahria has Bahria Travel and Recruiting Agency, Bahria Diving, Bahria Paints, Bahria Deep Sea Fishing, Bahria Dredging, Bahria Construction and Falah Trading Agency (information extracted from The International Conference on Soldiers in Business, Jakarta October 17, 2000; paper by Dr Ayesha Siddiqa-Agha).

Almost all of these are mismanaged, subsidy-dependent, debt-ridden, money-loosing propositions. All are a burden both on the national as well as the defence budget.

Independent estimates on the cost of forward deployment of troops vary from Rs 2 to Rs 4 billion a month. Multiply that by twelve and we would need to cough out a colossal Rs 24 to Rs 48 billion; a massive increase of up to 30% in the already bloated defence outlay.

In order to get out of the woods, internal as well as external dynamics would have to change. Solutions to a whole array of our problems actually lie in New Delhi. Internally, misallocation of resources would have to end. The government as well as our soldiers would have to get out of the productive sectors of the economy.