Zardari gets economic lifeline
By Syed Fazl-e-Haider
QUETTA, Pakistan - Pakistani President Asif Ali Zardari wrapped up his four-day
visit to Washington last week with crucial additional economic assistance that
may help to prevent disintegration of the country's crumbling economy.
The US House Committee on Appropriations has approved US$1.9 billion in
supplemental aid for the country, which includes aid for counter-insurgency and
economic and security aid.
The US Senate has taken up a bill, sponsored this month in the US by Senator
John Kerry, who heads the Senate Foreign Relations Committee and Senator
Richard Lugar, to triple American economic assistance to Pakistan. Washington
has
also earmarked $700 million in its budget for the next fiscal year for training
and equipment to improve the country's counterinsurgency capability, compared
with $400 million allocated for this purpose in the current fiscal year. The
economic support initiative is part of the policy shift Washington is making in
its relationship with the anti-terrorism ally in the region, considered
critical to US security interests.
"The designated amount of $1.9 billion is more than what was requested," Husain
Haqqani, Pakistan's Ambassador to the US last week told the media men in
Washington. "The approved amount is not tagged with either conditions or time
tables, though the progress will be assessed periodically." Haqqani said
Zardari's visit had turned out to be extremely productive.
The additional assistance, $591 million above what was requested, is part of a
$96.7 billion 2009 war funding bill for Iraq and Afghanistan and includes about
$600 million economic aid and $400 million for enhancement of counterinsurgency
capability in the fiscal year beginning October 1, 2009. The $1.9 billion aid
will be used for agriculture and food security, strengthening national and
provincial governance, expanding the rule of law, and improving access to and
quality of education.
The funds will also be used to help people displaced as a result of the
military operation being carried out by the Pakistan government against Taliban
insurgents in the Malakand and Swat areas of North West Frontier Province
(NWFP). The government needs resources to provide the internally displaced
persons (IDPs) affected by the fighting between Taliban insurgents and troops
with food and essential relief items. Over a million people have so far fled
the Taliban flashpoint district of Swat.
The humanitarian crisis in the NWFP is intensifying, according to the
International Committee of the Red Cross (ICRC), which is already assisting up
to 100,000 displaced people in NWFP and the country's tribal areas with
war-torn Afghanistan.
The Pentagon is reportedly seeking $130 billion in war funds for the next
fiscal year, including $65 billion for Afghanistan and $61 billion for Iraq.
This will be the first time since 2003 that the Afghan war funding has
surpassed the outlay for Iraq. For the current fiscal year ending September,
the Pentagon requested $87 billion for Iraq and $47 billion for Afghanistan.
The US State Department spokesman Robert Wood said last week that the Barack
Obama administration was also urging US lawmakers and their staff to work
quickly to provide economic support to the government of Pakistan. The
department considered the talks held with Zardari as "very constructive" and
"very substantive".
Local analysts believe that $1.9 billion aid will create additional budgetary
resources for Pakistan for its fiscal year starting in July. The cash-strapped
country, which is preparing its budget for the next fiscal year to be presented
next month, needs additional resources in order to support social safety nets
and development spending. A deterioration of macroeconomic fundamentals forced
Islamabad to seek help from the International Monetary Fund (IMF) for a $7.6
billion bailout in November.
Local traders and businessmen had hoped President Obama would announce direct
market access in the US for Pakistani products with a zero rate duty. The South
Asian economy has suffered a loss of $68 billion since the "war against terror"
got underway.
The US should assist Pakistan to overcome its economic crisis by restoring the
quota system on a par with all other underdeveloping countries, the Daily Times
reported, citing Sultan Ahmad Chwala, the president of the Federation of
Pakistan Chamber of Commerce and Industry and Iftikhar Ali Malik, the founder
president of the Pak-US Business Council. They said the US programme of
reconstruction opportunity zones must be implemented instantly, supporting
purchasing from 550 textile units which required rehabilitation and direct
access to the US market.
The average unit price of Pakistani textile products fell sharply during the
first nine months of the current fiscal year. The total export value for
textile products fell 7.6% to $7.23 billion in the July 2008 to March 2009
period from $7.82 billion in the previous comparable period amid intense
competition and the global economic meltdown. Frequent terrorism incidents have
also hampered timely shipments of finished textile products from Pakistan.
Worsening security in the country has deterred foreign investors, with foreign
direct investment declining 8% during the first eight months of the current
fiscal year from 12 months earlier to $3.04 billion.
The country is facing a $6 billion budget shortfall during the current fiscal
year, and local analysts believe a major challenge for the government will be
to achieve the fiscal deficit target of 3.3%, as pledged to the IMF, by next
year.
Pakistan will require $12 billion from external sources every year for at least
the next five years to meet its financing requirements, Business Recorder
reported, citing Shahid Javed Burki, a former World Bank senior vice president.
The country expects to receive $14 billion assistance in the next two years
from different sources, including $3 billion under the Kerry-Lugar legislation.
Their bill would triple non-military aid to Pakistan for the next decade.
The other sources include $5.2 billion from Friends of Democratic Pakistan, $2
billion each from the World Bank and the Asian Development Bank and $1 billion
from the Islamic Development Bank. The country's external debt and liabilities
nine months into the present fincancial year stood at $49.7 billion, or 30.7%
of the year's projected gross domestic product (GDP), compared with 27.6% of
GDP at the end of June 2008.
The government has proposed to slash its Public Sector Development Programme to
255 billion rupees ($3.2 billion) for the 12 months to June 2010, down
from 262.1 billion rupees in the present financial year, itself already cut
from an initial 371 billion rupees.
United States has spent $12.3 billion since 2002 aiming to end the "terrorist
threat" on Pakistan's border with Afghanistan. As the Taliban has made further
inroads in to Pakistan itself, President Barack Obama has said there will be no
blank check for Islamabad.
Critics say that in a country where up to 40% of its 160 million population
live on less than $1 a day or less, Pakistan's ruling elite wants to keep its
perks and privileges at all costs. They say the country's rulers have no
hesitation in slashing development expenditure, eliminating subsidies, going
cap in hand to "friendly" countries and borrowing from international lenders.
The poverty level meanwhile continues to rise amid persistent high inflation,
the deterioration of the security environment, declining inflows of foreign
funds and reduced economic activity.
Syed Fazl-e-Haider, sfazlehaider05@yahoo.com, is a Quetta-based
development analyst in Pakistan. He is the author of six books, including
The Economic Development of Balochistan (2004).
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