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A billion dollar question

By Imtiaz Gul

The News, Dec 25,2011

In the aftermath of the Mohmand incident resulting in the deaths of 24 Pakistani soldiers and officers, the Obama administration and lawmakers in Washington have once again invoked economic and military assistance as a tool to force Pakistan into compliance, and also to forget the Salala attack as an accident.

The latest freeze of $700 million military aid for Pakistan notwithstanding, let us look at the current mood in Islamabad and Rawalpindi. Discussions with senior civilian and military officials can be summed up the following way:

“We do not want the military assistance. Nor are we interested in the much touted economic aid under the Kerry Lugar Berman Law (KLBL) 2009. The US Senate may freeze whatever assistance the government intended for Pakistan but our message is clear; the Americans and other Nato countries have had a free ride in the last decade or so. The country has got plenty of uncalled for flak in the world, and endured far more damages than the assistance it has received. So better live without that assistance.”

Pretty alarming posturing, it seems, because the Nato supplies via Pakistan remain frozen, with no prospect of resumption in the next two weeks.

The reaction flows from a bruised ego. Also because, the US has declined to reimburse some $3.2 billion that it owes Pakistan under the Coalition Support Fund (CSF). The refusal came through during the recently concluded Pakistan-IMF talks in Dubai, when the Fund mission reportedly consulted the US authorities in Washington (USA has the largest voting share on the IMF Board) to check out whether Islamabad should expect some payments in reimbursements. The US authorities reportedly told the IMF that Pakistan may get maximum $400 million during the current fiscal year.

As of now, this has upset Pakistani team’s expectation of getting over $1billion worth of CSF reimbursements. But let us take a look at the figures the US administration flags all over when talking of “20 billion dollars in ten years” to Pakistan. Until early last year, the CSF reimbursements for the period until 2009 amounted to slightly less than $9 billion. (It is technically reimbursement and not security assistance).

Ministry of Finance officials say that Pakistan has received $742 million in December 2010 for the CSF reimbursements, and up to $375 million under the Kerry Lugar Berman Law (KLBL) during 2011. Secretary of State Hillary Clinton, during her October visit to Islamabad, spoke of $2 billion figure for 2010-2011 under the KLBL. Meanwhile, the US administration counts $550 million that the American government made available for the recovery and rehabilitation of the 2010 flood-affected areas also to the aid under the KLBL.

Back in July, the US had withheld $800 million in aid (including $300 million for training programmes under the US trainers) after Pakistan ordered 125 American military instructors to leave the country against the backdrop of the raid on Osama bin Laden compound. Until then, according to the US official figures, security-related funding, including the Coalition Support Funds (CSF), amounted to about $14.14 billion until 2010, and this included the operational cost of the 140,000 Pakistani troops deployed along the 2560-kilometer border with Afghanistan and the training-capacity building programmes for the paramilitary force called the Frontier Corps.

These figures also underscored the sharp contrast in the spending patterns in ten years; almost two-thirds of the American aid going into security-related heads, while the social sector and economic infrastructure received the rest one-third.

As for the hardware, the US gave Pakistan (under Foreign Military Funding)

a) 20 used cobra helicopters out of its surplus (extra defense articles) plus 10 cracked ones for cannibalization.

b) Some 16 F-16s (used).

c) 16 MI 17 choppers (used).

d) About two dozen 412 choppers(new).

e) Seven C 130s (used).

f) Seven P3 Orions (used).

g) About 5000 TOW air-to-ground anti-tank missiles.

h) Phalanx guns for Naval Air Defense.

i) Several thousand Ak 47 Rifles.

In addition to that, the US sold Pakistan — against cash and credit — 18 new F-16 aircrafts. The assistance for counter-insurgency, counter-narcotics, Frontier Corps capacity-building was part of security-related assistance.

The army claims that (ISPR Press Release, June 10, 2011) the US security related assistance provided in cash (coalition support funds – CSF) as well as in kind has been about $12.522 billion. This assistance included $8.647 billion on account of CSF and $3.875 billion on account of security assistance in kind (weapons, equipments, expenditure of training by US trainers, services, visits, pay of trainers etc for armed forces of Pakistan, civil armed forces and even anti-narcotics force).

Out of the total $12.522 billion, Pakistan Army received $1.455 billion under the CSF head and $1.023 billion on account of security assistance in kind, bringing the total amount received by the Army to $2.478 billion out of $12.522 billion pledged since early 2002, the statement said.

Non-reconcilable amounts

Also, on average, officials say, the US reimbursed only up to 65 per cent of the total bills under the CSF in the last ten years. That is why an amount of $2.5 billion under the CSF claims remains contested as ‘non-reconciled’ amount. The last CSF bill that Pakistan submitted with Washington in May 2011 had amounted to $2.3 billion, which has now shot over $3 billion for the simple fact that Pakistan spends at least 100 million every month on the deployment of some 150,000 troops on the western borders.

This situation confronts Pakistan with two worries; shortfall in expected foreign exchange, and secondly, bad name “for not doing enough despite getting billions of dollars from the United States.”

This means (according to The News, Dec 19th) that the foreign currency reserves could fall to $12 billion from the current $16 billion mark if the $800 million installment from Etisalat for the PTCL privatisation, the auction of the 3G mobile license (expected in March), resumption of programme loans from the World Bank and Asian Development Bank to the tune of $1billion and $500 million from the Euro Bond do not materialise. Under the current circumstances, the fate of over $3 billion accumulated under the Coalition Support Fund (CSF) also hangs in the balance — at least for the next few months.

Viewed against this backdrop, one major question looms large; how much impact does the entire US military and civilian aid add to Pakistan’s GDP? If a study by the Woodrow Wilson Centre, carried out by its former vice-president Shahid Javed Burki, were any indicator, Pakistan can survive (without cash assistance from the United States).

“If the US civilian assistance is completely withdrawn, it will only have an impact of 0.14 per cent on Pakistan’s GDP growth.” (The News, Karachi, April 29, 2011)

Shahid Javed Burki, a former finance minister, reckons that around 40 per cent of that amount goes to the American consultants and Pakistan only receives approximately 60 per cent of the pledged aid. (In his book Cables from Kabul, former British ambassador to Kabul Sherard Cowper-Coles also speaks of the same percentages, saying “a good 40 per cent of the US money goes back to the United States in service charges and consultant fees).

Pakistani military officials seem to stand firm on their rejection of the American assistance under the current circumstances. The GHQ also insists the CSF reimbursements must not be touted as “assistance”, and hope they can survive without the assistance — mostly used military hardware and some hard cash.

But largely, the US money and hardware is not as important as Washington’s pleasure and its weightage in the international finance institutions and finance markets. That is where the US displeasure could pinch and aggravate Pakistan’s internal economic crisis. The country needs goodwill and regardless of the merits or otherwise of the American “aid and assistance”, the absence of Washington’s goodwill at international forum does matter a lot for the country. And this is what all power-wielders have to keep in mind in the larger and longer interest of the country and its teeming millions.

Imtiaz Gul is the Executive Director of the independent Centre for Research and Security Studies, and is currently a Fellow of International House of Japan/Japan Foundation, Tokyo

Email: imtiaz@crss.pk