. .

Politics & Policy
Sanctions lifted: The impact



Politics & Policy


Oct 01 - 07, 2001

As a gesture of appreciation for Pakistan's cooperation in combating terrorism, President Bush on Sunday lifted nuclear related sanctions imposed on Pakistan in the aftermath of nuclear explosions in 1998. Surprisingly, however, the curbs that bar US assistance to government, which were imposed on Pakistan in 1999 when Gen. Musharraf came into power are still in force despite the fact that it has offered the cooperation which is being appreciated by the US administration.

Nuclear related sanctions have also been lifted in case of India simultaneously with Pakistan. Being subjected to no other sanctions, India is now free to buy US arms and technology to which Pakistan is not entitled as yet. The waiver of all nuclear-related sanctions including those under Symington, Pressler and Glen Amendments would mean the United States could vote in favour of multilateral aid packages such as the Poverty Reduction and Growth Facility, Pakistan is about to begin negotiating with the International Monetary Fund.

The nuclear-related sanctions imposed on India and Pakistan included bans on foreign assistance, ammunitions sales and licenses; government credits and financial assistance; and US support for multilateral financial assistance.

However, in some ways the gesture may just be symbolic for Pakistan in as it continues to face what are called 'democracy sanctions. Section 508 of the US Foreign Operations Appropriations Act contains a prohibition against a broad range of assistance for a country whose democratically elected head of government is deposed by military coup or decree. Not to forget, Pakistan also faces restrictions under Missile Technology Control Regime (MTCR).

The current announcement is a mixed package of sugar and spice. On the negative side, the democracy sanctions will still retain curbs on financing on military equipment. There cannot be any direct US economic assistance to Pakistan. Though under an existing "Notwithstanding Clause" waivers have already been exercised on some 508 restrictions covering counter narcotics, counter terrorism and aid to NGOs.

Pakistan will remain barred from participating in an international military education and training (IMET) programme, though some in Pentagon consider this a US loss. It also means Trade and Development Agency (IDA), the US backed Overseas Private Investment Corporation (OPIC), Trade and Development Agency (TDA), Overseas Private Investment Corporation (OPIC) and the Economic Support Fund (including AID economic growth programmes) are still barred from operating in Pakistan.

The US President Bush has the powers to waive even 508 under the supreme national interest clause of US statutes. But Washington will keep Pakistan on tender hooks to see the extent of Pakistan's cooperation. President Bush may use his authority to waive these restrictions after keeping Pakistan under watch for some time.

In view of this scenario there is hardly any justification for any jubiliation for Pakistan on what has been offered by the US sofar. The Finance Minister however, appeared jubiliant when he welcomed US decision to lift the sanctions. He said it would allow us to have access to billions of dollars of multilateral loans at very concessional terms. The International Monetary Fund (IMF) had already shown its inclination to oblige the United States by signaling for the Poverty Reduction and Growth Facility (PRGF) of $ 2.5 billion, to be followed by another debt rescheduling.

A report emanating from Washington quoting its chief said that the IMF was preparing a sizable loan for Pakistan at US promting. According to the report, a Pakistani delegation is expected to reach Washington shortly to clinch the last tranche of $ 596 million loan under standby arrangement which carries comparatively high interest, and discuss a package of $ 2.5 billion Poverty Reduction and Growth Facility (PRGF) which will have soft terms.

Independent observers, however feel, that it is no reward for Pakistan's help and cooperation in the face of grave odds. PRGF was already in the pipeline as Pakistan had been able to achieve endorsement of its economic policies by the donor agencies by fulfilling all their conditionalities. Sanction of PRGF will threfore be no special favour. What we need is considerable amount of debt write offs". stated a senior Islamabad based economist. The United States and Japan, two largest bilateral creditors of Pakistan, should be generous enough to at least waive a considerable amount of their outstanding debt to stabilize external sector of the economy.

Pakistan sought two back-to-back debt reschedulings from the official bilateral creditors at the Paris Club. The second one is still being formalized with the individual countries, as agreements with the United States, Japan and some other countries would be signed before September 30, 2001, deadline.

The total debt of Pakistan at 103 per cent of GDP is even worst than the Highly Indebted Poor Countries (HIPCs). The rate of unemployment at 10 per cent, 38 per cent poverty line, and broken social infrastructure is suffocating the life of 140 million poor Pakistanis. This was mainly, if not totally, the result of Afghan crisis, and corrupt leadership that siphoned off all the bailouts for personal gains.

According to the latest report of Global Development Finance of the World Bank, Pakistan has been included in the list of Severely indebted low income countries (SILICS) of the World. The report has included 33 countries in this category. The list has come down from 41 to 33 but now two countries Pakistan and Ukrain have been included as their debt indicators have worsened. As such Pakistan is entitled to write off of its loan upto 60% of its total outstandings. This is the minimum Pakistan should ask for