More about the sugar than politics in Lahore

LAHORE, Pakistan (Reuters) - A porter at Lahore's railway station for three decades, Iftikhar Shah worries about suicide bombers and political instability but his biggest concern is the price of sugar.

Like many of Pakistan's poor, he struggles to make ends meet as the price of basic staples rockets and power cuts cripple many industries, further worrying investors already scared away by the Taliban insurgency.

"Thieves are in government," said Shah, 50, standing outside the imposing British colonial-style station in Lahore, capital of Punjab, Pakistan's most politically important province and home to many of the military and political elite.

The price of sugar, he said, had doubled since President Asif Ali Zardari came to power 16 months ago, and other kitchen staples such as cooking oil and flour were prohibitive.

Sugar prices have soared in recent weeks as millers say farmers are charging higher prices for sugarcane after a low 2009/10 crop estimated at 3 million tonnes of refined sugar against demand of 4.3 million.

The government has in the past blamed hoarders for rising sugar prices.

Speculation has recently swirled over President Zardari's future amid corruption allegations and pressure from the powerful military, but there is also popular anger over his handling of the economy.

He was in Lahore last week and posters are still pasted across the city welcoming him. Shah seemed disinterested in the visit, saying the government had done nothing for him.

SURVIVAL TAKES PRIORITY

A few miles away from the railway station, poorly paid security guards gathered firewood in a dusty ditch, preparing for a cold night in a tent.

"We don't care about Zardari. We have no shelter, it is very difficult to survive. We pray to God to do something for us," said Hamid Latif.

The military has been cracking down hard on the al Qaeda-linked Taliban, wiping out bases in their South Waziristan stronghold. But long-term stability also depends on the state's ability to improve living standards and create jobs to keep impressionable young men from embracing extremism.

"This is a nuclear power country which is so badly managed that we risk a popular swing to the extremists," said Rasul Bakhsh Rais, a political science professor at the prestigious Lahore University of Management Sciences.

"His team has no handle on the structural issues of the economy," he said, referring to Zardari.

"BOTTOMLESS PIT"

The International Monetary Fund bailed out Pakistan in November 2008 to avert a balance of payments crisis and in July last year increased the loan to $11.3 billion (6.9 billion pounds) from an initial $7.6 billion.

The United States also plans to pump in $7.5 billion in non-military aid over the next five years, with a focus on energy, water and infrastructure projects, all areas analysts say must be improved for long-term stability.

But in a country where anti-American feeling runs high, critics saw certain conditions attached to the aid as a violation of sovereignty and the military expressed rare public opposition to the package the government championed.

How the aid is handled is crucial for both sides, with the U.S. Congress demanding accountability for taxpayer funds amid concerns money will be funnelled directly to the government, accused of widespread corruption.

"Don't give any money to the government, it is a bottomless pit," said a former foreign secretary, Shamshad Ahmed Khan, who is frustrated by the lack of attention to civilian needs.

"Support the people, not the corrupt rulers. They will loot and run," he said.

While Zardari is under fire from many sides, few Pakistanis want the military to be in full control as it has been for more than half of Pakistan's 63-year history. No civilian government in Pakistan has ever served out its term.

"We want a democracy in Pakistan and the army should remain in their barracks," said Imran Butt, a student who said he planned soon to leave for Germany and better opportunities.

But the population is looking to the military to crush the Taliban.

That could take time. After the army launched an offensive in October, the Taliban hit back with bombings that killed hundreds of people.

The United States also wants Pakistan's army to eliminate Afghan Taliban militants who cross over into Afghanistan to attack U.S. and NATO troops.

That pressure has deepened anti-American sentiment and generated endless rumours and conspiracy theories, from the lawless tribal areas along the Afghan border to Lahore, where the poor transport families on rickety motorcycles and the wealthy flock to designer label stores.

"We have only one growth industry in Pakistan and that is conspiracy theories," said Rashed Rahman, editor of the liberal Daily Times newspaper.

(Editing by Robert Birsel and Jerry Norton)

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