Chagai-I - Economic Effects

Economic Effects

The United Nations Security Council adopted Resolution 1172 condemning the Indian test and that of Pakistan's. United States, Japan, Australia, Sweden, Canada, and International Monetary Fund, imposed economical sanctions on Pakistan. The Japanese government had called its Ambassador from Pakistan, and suspend its foreign relations with Pakistan. During the time of nuclear testing, it was reported that Pakistan had only US$ 1 Billion in its national treasure, and India had reported by be $29Billion in its State Bank. By comparing to Pakistan's economy, the sanctions imposed by Resolution 1172, was exerted only with marginal effects on India’s economy and technological progress. The IMF had suspend $3Billion aid to Pakistan, and the country's economy was near facing the serious economic default. Sartaj Aziz, an economist and Foreign Minister, and his economics team then briefed Nawaz Sharif that if the economy reaches to the financial default, the terms for the CTBT and NPT would be exercised more tougher on Pakistan, if Pakistan seeks a Bailout plan from the World Bank, the IMF, and the Asian Development Bank, or even the United States.

The economy was already deteriorated, Aziz's team was quickly taking the steps to control the economy. Prime minister Sharif ordered his Finance minister, Sartaj Aziz, to freeze the low foreign exchange reserves. Aziz then asserted that such act would lead to an extreme financial default. Insead, Aziz offered the investors to sell their shares at rate of ₨. 46, which was ₨. 2 was more that time, to the Government in order to avoid the financial default. This resulted in improving the control of the economy and Nawaz Sharif government then gained the control of the economy. Sharif then suspended his capitalist policies and made a move to introduced the socialist economics policies, previously introduced by former Prime minister Zulfikar Ali Bhutto in 1970s. Sartaz Aziz was replaced by Sharif as he opposed Sharif's plans to divert an economic recession by taking such steps. Aziz was made Foreign minister and was succedeed by Dr. Ishaq Dar, a career professor of economist who took this daunting charge.

In all, the United States had suspend the economical aid to the Pakistan, but continued the limited economical aid to Pakistan on humanitarian basis. Increasingly, the composition of assistance to Pakistan shifted away from grants toward loans repayable in foreign exchange. All new U.S. additional economic assistance to Pakistan was suspended in May 1998. The sanctions were lifted by President George W. Bush after Pakistan President General Musharraf allied Pakistan with the U.S. in its war on terror. Having improved its finances, the government refused further IMF assistance, and consequently the IMF program was ended.