A highly classified National Intelligence Estimate warns that increased violence, massive energy and food shortages and political instability threatens to destabilize Pakistan, according to a report published Tuesday in McClatchy Newspapers.

“A U.S. official who participated in drafting the top secret National Intelligence Estimate said it portrays the situation in Pakistan as “very bad,” McClatchy reported. “Another official called the draft “very bleak,” and said it describes Pakistan as being “on the edge.”

The economic crisis in Pakistan has forced millions of people into poverty, which experts fear make them ripe for Islamic extremists to recruit.

Over the past year, the cost of wheat, rice and milk has skyrocketed. Economists have warned that prices will increase further if Pakistan defaults on its foreign debt. Prior to Pakistan’s economic downfall, one-third of the country’s 56 million residents lived below the poverty line. Millions more are said to have fallen into economic hardship.

The dire situation inside Pakistan, a country that the U.S. counted as a strategic ally in the so-called global war on terror, is due, in part, to an al-Qaeda backed insurgency and the Pakistani Army’s unwillingness to cooperate with the U.S. and crackdown on the terrorist organization, McClatchy reported.

“The estimate says that the Islamist insurgency based in the Federally Administered Tribal Area bordering Afghanistan, the suspected safe haven of Osama bin Laden and his top lieutenants, is intensifying,” McClatchy reported.

The NIE, classified reports prepared for President George W. Bush, Congress and other officials, by 16 U.S. Intelligence agencies, are also being drafted on Iraq and Afghanistan. Those reports are being prepared to assist a new administration on the resources needed to continue military operations in those countries.  

“The Afghanistan estimate warns that additional American troops are urgently needed there and that Islamic extremists who enjoy safe haven in Pakistan pose a growing threat to the U.S.-backed government of Afghan Prime Minister Hamid Karzai,” McClatchy reported.

Earlier this month, Adm. Michael Mullen, the chairman of the Joint Chiefs of Staff, told reporters that without immediate economic and political stability in Afghanistan the security situation will continue to deteriorate.

“The trends across the board are not going in the right direction,” Mullen told reporters “It will be tougher next year unless we get at all these challenges.”

Gen. David McKiernan, the top U.S. commander in Afghanistan, said earlier this month that a shortage of troops means the situation in Afghanistan “might get worse before it gets better.”

“We’re in a very tough fight,” McKiernan said

Still, “the three NIEs suggest that without significant and swift progress on all three fronts – which they suggest is uncertain at best – the U.S. could find itself facing a growing threat from al Qaida and other Islamic extremist groups, said one of the officials,” according to the McClatchy report.

Pakistan’s former president, Gen. Pervez Musharraf, received tens of billions of dollars in U.S. aid since 9/11 in exchange for a promise to crackdown on al-Qaeda in his country, resigned, rather than face impeachment for leading the country into a grave economic crisis.  

Asif Ali Zardari, the widower of the late Prime Minister Benazir Bhutto, was elected Pakistan’s new president.