With US help, money flows in Pakistan

The problem, analysts say, is that Pakistan's economic wiring hasn't changed much in 60 years. With 65 percent of the population dependent on agriculture, it remains a farm economy with very little industry. Yet these days, it is being driven like a Ferrari.

Pakistan has spent its way to prosperity with foreign cash, but has failed to build domestic capacity to maintain such growth on its own. Instead of investing in agriculture or industry in order to build the country, investors are going for higher-yield returns. This has infused banks, real estate developers, and communications companies with billions of dollars.

Flush with this cash, banks are offering historically low consumer loans, which is why Mr. Paracha has been selling so many cars in recent years. About 80 to 85 percent of the cars are leased or financed by banks, he says. Elsewhere, there are plans to build 40 buildings at least 30 stories tall in Lahore alone, says Dr. Burki.

Little of this growth, however, has created jobs or businesses. In 2004 and 2005, for example, only agriculture had significant job growth – and that was due to seasonal harvests. Every other sector had 0.1 percent or negative growth, according to a report by the Social Policy and Development Centre in Karachi.

Such spending "will tide over the country for two to three years," says Burki. "But it is creating long-term problems."

High personal savings rates and a strong agriculture sector would prevent an economic collapse. But the pride of the Pakistan economy – a services sector that accounts for more than half of the country's growth – "is not sustainable," says Qazi Masood Ahmed of the Institute of Business Administration in Karachi.

For example, since Pakistan is now consuming more goods – but not making more itself – the trade deficit is forecast to hit an all-time high of $9 billion this year. The cost of this conflated consumerism has hit average Pakistanis the hardest, with inflation routinely topping 7 percent.

On the streets of Pakistan's largest cities, it is inflation more than judicial crises or the threat of terrorism that angers cobblers and shopkeepers. Muhammad Dullah, a cobbler, doesn't know anything about the current protests to insure an independent judiciary. Here, beside a Karachi thoroughfare teeming with pushcarts and cars, he just knows life is getting harder. Sitting on the sidewalk amid an avalanche of sandals and loafers, he says, "I've experienced a decline in my income and a hike in the prices of essential commodities."

Mr. Sappenfield is the New Delhi correspondent for the Monitor and USA Today.

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