KARACHI, Sept 10: September 11 attacks on US proved to be a turning point for Pakistan’s economy. It was rewarded generously for being a front-line partner of the United States in its war against terrorism. Some quarters, however, believe that whatever has been offered is not enough. Pakistan needs more than budgetary support.
A study of facts belied donor’s claims that loans were offered on some economic criteria. In four months following 9-11 and realignment of Pakistan in US camp it was offered $1.5bn assistance/grants, it signed debt rescheduling accords with 15 countries, in addition to a few loans offered during the period (Sept-Dec 2000). This was despite the fact that nothing had changed on the economic front.
When asked to comment the World Bank office in Islamabad was stick to its earlier stand. It maintained that the international financial institutions (IFIs) were extending their financial and technical support to Pakistan on the basis of certain economic reform programme, and not on some political consideration.
“Ever since 9/11 occurred bilateral assistance may be coming on political considerations, but the IFIs specially the World Bank, IMF and the Asian Development Bank are supporting Pakistan because of the sound economic reform agenda being pursued by the present government,” an official of the bank added.
Talking to Dawn he denied that IFIs were being pressurised by the United States or any member of the G-8 countries to help Pakistan due to President Pervez Musharraf’s all out support to the US-led coalition against terrorism.
The Economic Affairs Division figures reveal that during the period between 1951 and 2000, total commitments of external grants and loans to Pakistan stood at $63.190 billion, out of which $54.151 billion had been disbursed. And according to official reports, Pakistan’s external debt, in present value term and in percentage of GNP is more than twice to that of India and Bangladesh and substantially higher than that of Egypt and Brazil. Till 2001, Pakistan had been burdened with some $36bn of debt, out of which around $15.5bn came from IMF and the World Bank and other institutional lenders and $12.5bn from the Paris Club.
ECONOMIC ASSISTANCE: Pakistan’s support for the US in its war against terrorism provided the cash-strapped country some relief in terms of assistance/grants. The US and its allies, Japan and European Union, during the first four months (Sept-Dec 2001) awarded Pakistan around $1.5 billion economic assistance package. The amount includes $673m US grant as part of $1bn package in direct budget and balance of payments support President Bush promised in a meeting with President Pervez Musharraf in New York in Nov 2001; $400 Japanese emergency economic assistance; $22.58 million from Germany; $16m from Britain; $7.42m from Norway; and $44.26m from the EU.
Pakistan has to receive $154.42 million from 10 countries to meet the cost of keeping the Afghan refugees during the period under review. The countries and grants: Canada $8.6m, Germany $7m, Indonesia $0.5m, Italy $4.5m, Japan $14.5m, South Korea $4m, Libya $0.7m, Qatar $1.6m, UAE $15m, and the US $98m.
Canada converted all its bilateral debt of about $300m into development grant followed by debt write-offs of œ20m from UK and $16m from Holland. The UNDP increased its financial aid to $168m from $84m.
Pakistan had received only $45m from Japan as draught grant and 15m franc economic and technical assistance from Switzerland during Sept-Dec 2000.
FOREIGN LOANS: Pakistan during the period under review received $135.5m IMF loan as final tranche of $600m standby loan. The Fund also disbursed $109m as first tranche under $1.3bn PRGF loan it had approved in Nov 2001 in Washington. The total IMF-backed bailout package over three-year stood at $9.5bn.
In Oct 2001, IMF and Paris Club assured Pakistan to fill $8bn financing gap during the next three years in order to provide a major relief to the economy of Pakistan.
The World Bank okayed $300m banking sector restructuring and privatization project loan out of total worth of $550m.
The ADB released $150m loan in Dec 2001, out of $350m loan it approved for different projects — police reforms, access to justice, etc. — besides announcing to raise Pakistan’s financial assistance from $625m to $950m for the year 2001.
The UAE approved $265m for six water projects. Overseas Private Investment Cooperation (OPIC) announced $300m investment loan. Abu Dhabi Fund agreed to give $265m soft term loan. China announced to provide $25m for textile industry.
The country during Sept-Dec 2000 reached $3.5bn bailout package with IMF as part of three-year loan in Prague. The package includes rescheduling of $3.3bn of debt from foreign countries and commercial banks. The IMF also approved $596m SBA credit for next 10 months.
The ADB approved $150m loan for micro-finance sector reforms, $350m for Wapda and KESC privatization and $52m for NWFP rain-fed areas. Other loans included $25m by IDB; Rs154m by China for plant-quarantine services and construction and rehabilitation of Karakoram Highway; and $45m from Bahrain-based Citi Islamic Investment Bank.
Debt rescheduling: During period between Sept-Dec 2001, Pakistan concluded some little over $1.454 billion debt rescheduling accords with 15 countries, including $379m loan by the US and $550m by Japan. The US debt entails payment over a period of 18-20 years.
The Paris Club, the main contributor to the economy of Pakistan, offered $12bn “shock re-profiting” of loans for 38 years. Under the arrangement Pakistan would have to pay nothing in debt servicing during the first 15 years, which will provide an exceptional cash flow savings of $2.7bn for the next three years. Pakistan secured only $25m debt repayment during Sept-Dec 2000.
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