US DOWNSIZES PAKISTAN

US cuts security aids for Pakistan 

"If you want Pakistan to be a friend of the United States, we are willing to be friends, but please understand, a Prime Minister Imran Khan can never become a stooge like Nawaz Sharif – Imran Khan"

 

In the Musharraf years and early period of Mr. Zardari’s government, then-U.S. ambassador Anne Patterson played a central role in Pakistani politics, including as a mediator between the military and the politicians, leaked U.S. diplomatic cables have shown.

However, U.S. officials insist that they no longer seek to influence internal politics in Pakistan, where anti-American sentiment runs high.  And instead, plan to squeeze Pakistan.

Pakistan external balance is deteriorating

Pakistan external balance is deteriorating and it has external debt servicing needs.US officials see the debt primarily to China through its infrastructure initiative. The US could block new IMF assistance, if/when it is requested.

The US often struggles to convert its economic power into political outcomes, though President Trump has ramped up efforts to do precisely that. In the fight against terrorism, the US Treasury has greatly expanded its efforts to cut off financing and through the experience and the Great Financial Crisis, access to the US dollar market, including for funding, is not simply a utility but is a privilege that the US could deny its adversaries.

“It’s a familiar situation, we have rising debt servicing and faltering growth  the short-term solution is the IMF, it’s probably a matter of months.” –  Yousuf Nazar, a former Citigroup Inc. banker"

US cuts security aids for Pakistan 

There are other ways in which the US can use its financial acumen to impose its will. Here is a drama that is unfolding, though it has not percolated into the public’s consciousness yet. It begins in Pakistan, which has been party to at least 13 IMF programs since 1980. Although it has not formally asked for another one, macro considerations suggest it is likely. Many expect Pakistan’s likely new Prime Minister, Imran Khan, to seek one shortly after assuming office. His party is about 22 seats shy of a parliamentary majority, after running a campaign against the two main ruling families. The US is threatening to veto it, which would make it hard for Pakistan to service its debt. Its debt is primarily owed to the IMF, World Bank, and China.

Pakistan is caught between a rock and a hard place. Given the number of times it availed itself to IMF assistance, it will be reluctant to stiff the multilateral lenders. It also wants to avoid having a debt problem with China, which has shown itself to be a harsh taskmaster. Loans from China are often not on concessionary terms and involve collateral. Recently, for example, Sri Lanka has to transfer ownership of Hambantota port to China (for 99 years, shades of Hong Kong).

US cuts Pak security aid to historic low

The US Congress has passed a  $716.3 billion defense spending bill, capping its security-related aid to Pakistan at $150 million, which is significantly below the historic level of more than $1 billion per year. Pakistan, during the Obama administration, used to get nearly 1.2 billion aid from the US under the Enhanced Partnership with Pakistan Act of 2009 also known as the Kerry-Lugar-Berman Act.

In August last year, US President Donald Trump unveiled his new South Asia policy and asked Pakistan to do more against terror groups. On Monday, US Secretary of State Mike Pompeo cautioned the IMF against a possible bailout for Pakistan’s new government to pay off Chinese lenders who have invested in the strategic China-Pakistan Economic Corridor.

Denial of US support will catapult Pakistan completely into Chinese Camp. All these developments are pointing towards a deepening economic and military dependence of Pakistan on China leading to its reduced dependence on US- and this has emboldened Pakistan to harden its stand.

The key issue behind all these spats is the policy of Good and Bad Terrorist followed by Pakistan. The US wants credible action against Haqqani Network and Afghan Taliban, but Pakistan is reluctant as it considers these terror groups as good terrorists and therefore strategic assets.

 

03 Aug 2018/Friday             Written by Afsana