Pakistan's New Perils

U.S. aid and a crackdown on invisible hawala money transfers lifted the economy. Now, with aid slowing, the central bank is worried

In the wake of the U.S. war against terrorism in Afghanistan, Pakistan has seen its economy improve dramatically over the past year. The reason: The resumption of American aid has allowed the country to undertake a massive debt restructuring. Plus, the global crackdown on the hawala system of informal money transfers has helped channel millions of dollars through Pakistani banks, taking the country's foreign-exchange reserves to a record high of $8 billion (see BW Online, 1/31/02, "Pakistan Cripples the Money Movers").

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