Pakistan's economy is still resilient after 2.5 years. An economy is a mirror to policies and leadership. Economy is built on trust, confidence and supporting institutions. Its an economy and not 'Qaroon Ka Khazana' that can never go finish. World's best economies face ups and downs. Reasons differ for each economy.
When PPP took over, Pakistan has $14 billion in reserves, Foreign Investment rose upto $8.4 billion, KSE was highest with worth of $75 billion capitalization, exports increased to become $18 billion. Rupee was stable at Rs.61 per dollar. Revenue collection of around Rs. 900 billion. Debt servicing decreased from 65% to 27%.
Now PPP just had to protect this and move further ahead. They hired Ishaq Darr as Finance Minister, who stated while in USA that figures were wrong. Which Finance Minister in the world says that? Secondly, PPP's own past corruption related perception, led an outlfow of investment. According to State Bank Pakistan and economic experts, there was an outlfow of some Rs.100 billion, in the 1st quarter of PPP governmemt. By, 27 Jan 2009, KSE market capitalization fell to $20 billion. By 27 Novv 2008, Foreign reserves fell to $6.59 billion. Rupee kept falling.
All these had repercussions on the economy.
This one article explains very well the phenomenon that took place.
Foreign Reserves Phenomenon: Shaukat Aziz versus PPP
http://presidentmusharraf.wordpress.com/2008/08/21/foreign-reserves-phenomenon-shaukat-aziz-versus-ppp/
You debt question I'll reply below. Thanks