Aug 7th 2008 ISLAMABADFrom Economist.com

The president of Pakistan, Pervez Musharraf, faces the prospect of impeachment
AP
PAKISTAN is sliding. Taliban commanders are taking over more of the country’s ungoverned north-west by the day. From there they launch attacks into Afghanistan, killing NATO soldiers and countless Afghans. America, hitherto a remarkably forgiving ally, appears to think Pakistan’s Inter-Services Intelligence (ISI) is assisting them. India certainly thinks so. Tensions between South Asia’s nuclear-armed rivals are rising. After a suicide-bomb attack on the Indian embassy in Kabul last month—which India blamed on the ISI—its national security adviser, M.K. Narayanan, warned that India might have to “retaliate in kind”.
The economy is hell-bound. Inflation is running at 25% a year. The stockmarket in Karachi has lost 35% of its value since April. During blackouts, Pakistani businessmen trade tales of capital flight. Foreign-exchange reserves—once emblematic of economic recovery—now barely cover three months of imports.
The government, a coalition led by the Pakistan People Party (PPP), has been paralysed since its formation in February. It has no plan for the north-west and appears to have given little thought to arresting the economy’s decline.
Indeed, the government does not even have a permanent finance minister. He and half his colleagues were withdrawn from the cabinet in May by the PPP’s biggest coalition partner, Nawaz Sharif’s Pakistan Muslim League (N). It was protesting against the government’s failure to reinstate 60 judges, who were sacked by Pervez Musharraf last November lest they object to his (apparently illegal) re-election as president. Mr Sharif trusts that, if reinstated, these judges would force Mr Musharraf to quit. For good measure, he has also demanded that parliament impeach the president. And he may have his way. After showdown talks on August 6th and 7th Mr Sharif and the PPP’s leader, Asif Zardari, reached a provisional agreement to impeach the president and restore the judges.
Both moves would be popular. Having ruled Pakistan more or less outright for almost a decade, Mr Musharraf is blamed for many of its troubles. According to a poll for the International Republican Institute, an American NGO, 83% of Pakistanis want him out and the judges reinstated. Mr Sharif’s principled stand on these issues—for so it is considered, despite the disregard he showed for the rule of law during his own two riotous spells in power—has boosted his ratings.
Support for the PPP-led government, which came to power amid euphoria, has dived. Its few efforts at policymaking—including a doomed effort to put the army-run ISI into civilian hands— have mostly been hapless. Under Mr Zardari, the PPP seems rudderless and divided; a third of its elected members are said to be ready to rebel.
Reports of Mr Musharraf’s impending exit—encouraged by the sporty president’s decision not to go to the Beijing Olympics on August 6th—may therefore be exaggerated. On the other hand, whether Mr Musharraf goes or not, it is certain that the government will continue wrangling. And at a time of national crises, this is an appalling prospect.
At least, as its budget deficit rises above 7%, Pakistan will have aid. On July 29th the US Senate’s Foreign Relations Committee voted to triple America’s non-military assistance, to $1.5 billion a year. Saudi Arabia is expected to defer payment on a $5.9 billion oil bill. But aid is not enough. After 18 months of political turmoil and worsening terrorism, Pakistan needs stability to restore the confidence of foreign investors.
From the Pushtun north-west, the news just gets worse. An unloved truce between the government and several Taliban commanders has mostly broken down. In Swat, 250km (155 miles) from Islamabad, where a mini-jihad erupted last year, 150 people are reported to have been killed in a week’s fighting between soldiers and militants.
The army operates more or less freely on the frontier but is reluctant to touch Baitullah Mehsud, the most powerful Taliban commander. With a forbidding fief in the never-conquered tribal area of South Waziristan, a well-armed militia and suicide-bombers at his disposal, he is a daunting foe. He also holds about 100 soldiers and civil servants hostage. But the army’s diffidence is increasingly being taken as evidence that, despite Mr Musharraf’s protestations to the contrary, Pakistan never abandoned its policy of harbouring terrorists at home and sponsoring them abroad.