A terrifying kind of mathematics has become popular among aid workers, analysts and others who spend their lives tracking the fate of Pakistan. It's a back-of-the-envelope calculation about how the country will get through the coming years without declaring bankruptcy: take the country's foreign debt ($53-billion), add interest, subtract the $1.8-billion that won't arrive as scheduled on Jan. 1 from the International Monetary Fund because Islamabad failed to meet loan conditions. Add the staggering cost, perhaps $10-billion, of rebuilding after summer floods.
The numbers seem bleak. The government floated the possibility last week of running a deficit for the coming year of $15-billion.
Islamabad's latest plan to raise revenue, a reformed tax law, has become bogged down by stubborn opposition parties, front-page criticism and street protests. The cabinet's economic team is threatening to quit.
Pakistan needs a bailout. But is the country still a good investment?
"That's the conversation people are having now, about whether you'd be throwing good money after bad," said Mosharraf Zaidi, a development expert and policy analyst based in Islamabad.
The international community has accused Pakistan of poor financial management for years. Cables recently posted by the website WikiLeaks show a U.S. intelligence official complaining in 2008 about the country's preference for spending money on strategic military hardware instead of development: "Despite pending economic catastrophe, Pakistan is producing nuclear weapons at a faster rate than any other country in the world."
Patience with such behaviour wore especially thin as the government failed to honour several promises for cleaning up its balance sheet in recent months. As part of its IMF loan deals, Islamabad had vowed to cut electricity subsidies and find new ways of bringing in revenue. In particular, foreign donors wanted the country to crack down on its upper classes, notorious for shirking taxes.
Instead, the government responded by calling for debt forgiveness - not an absurd idea, in a country that spends up to 40 per cent of its annual budget servicing its debts, but still galling for international lenders.
The government also continued printing money to cover its costs.
Islamabad had promised to stop borrowing from its own state bank, but instead took almost $4-billion to prop up the budget - contributing to crippling inflation.
Defence spending increased this year, and will likely continue rising, while the government cut its development budget in half.
"If something like this happened in Canada, there would be a revolution," Mr. Zaidi said recently at a fashionable coffee shop in Islamabad. Outside the window, however, in the leafy neighbourhood where expats shopped for Christmas decorations and luxury vehicles cruised slowly along well-paved streets, there was no sign of a revolt. That has been an enduring feature of Pakistani politics, the willingness of the middle and lower classes to absorb hardships. It remains an open question how long that trend will continue. Recent protests against the new Reformed General Sales Tax (RGST) were not widespread, but economists say the gross domestic product must grow an average of 7 per cent per year to keep up with the explosive number of young Pakistanis joining the work force.
The economy achieved that average rate of growth from 2000 to 2007, a period of declining poverty and unemployment, when Pakistan was mentioned among the so-called "Next Eleven" emerging economies by the U.S. investment bank Goldman Sachs.
But the growth streak slowed down as militancy erupted, particularly after the bloody storming of Islamabad's Red Mosque in 2007. The government had hoped for 4.5 per cent growth in this fiscal year, but revised that down to 2.8 per cent after the recent floods.
Many of the nightmare scenarios envisioned after the floods have not emerged, however. Epidemics did not ravage the country as some predicted. The biggest export industry, cotton textiles, limped through the disaster but survived.
Pakistan's own expatriate community abroad, which already sends home almost $10-billion per year, proved generous with their countrymen. In some backwater corners of the country, flood victims forced to live in camps have experienced better hygiene, education and health care than in their own villages. Those people could get a fresh start, if the international community decides to invest in major reconstruction.
"Let's build better, this time," Mengesha Kebede, the Pakistan head of the UN High Commission for Refugees. "There could be a qualitative improvement in the quality of life."
Others say that demographic forces, and a thirst for education, will ensure that the country eventually pulls itself out of its current problems.
Tahir Andrabi, an economist at Pomona College who has been working on a four-year study of education in rural parts of central Pakistan, said the country already has the falling fertility rates and a growing cohort of educated women usually associated with strong development.
"It's remarkable, what's happening in Pakistan," Mr. Andrabi said.
"This is supposed to be the most dangerous country in the world, and female education is skyrocketing."
Follow us on Twitter: