Pakistan seeks US help to prevent default and reset ties with its estranged ally
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Facing the looming threat of an economic meltdown, Pakistan seeks America’s help for a bailout. The relations between the two erstwhile allies have been in a deep freeze for quite some time but some recent contacts at various official levels have raised hopes of some melting of the ice.
Pakistan’s military chief General Qamar Bajwa last week phoned a senior US State Department official to request help in securing an early disbursement of funds from the International Monetary Fund (IMF). The bailout package is critical for Pakistan as it struggles to avoid default on its external loan repayments.
Gen. Bajwa reportedly made an appeal for the White House and Treasury Departments to push the IMF to release immediately nearly $1.2 billion that Pakistan is due to receive under a resumed loan program. Pakistan has already been granted “staff-level approval” for the loan but the disbursement is waiting for the IMF board’s final authorization.
No firm date has been set for the board meeting as the agency has gone into recess till late August. The delay has fuelled uncertainty as foreign exchange reserves have fallen to a dangerous level. With less than $9 billion in the reserves, the country is left with hardly enough funds to pay for more than four weeks of import bills.
The US is the largest shareholder in the multilateral lending agency and Washington’s support is seen as crucial for loan approval. With the relations between the two nations having hit a new low in the past few years, the US administration has openly expressed its reservations about the country using IMF loans to pay back China. But it has not led to its blocking the loan package.
The situation has become more serious with coming external debt repayment obligations. Pakistan’s external debt-servicing obligations are projected to be $23 billion in 2022-2023. Meanwhile, the delay in the IMF deal is also affecting Pakistan receiving financial assistance from other multilateral agencies, like the World Bank and some friendly countries. It has also caused panic in the market resulting in rapid erosion of the value of the Pakistani rupee against the US dollar.
Gen. Bajwa’s telephonic call to US Deputy Secretary of State Wendy Sherman for IMF support is unusual for a military chief. It indicates growing concern of the military leadership about the deteriorating economic situation that could also have serious repercussions for the country’s security and stability. The spectre of a nuclear armed country with a population of more than 220 million facing economic meltdown is also disturbing for regional stability. It is however, not clear if Gen. Bajwa has managed to convince the US administration.
Some observers believe that with the questionable credibility of the present coalition government led by prime minister Shahbaz Sharif, the military leadership is getting increasingly involved not only in economic matters but also taking initiative in reviving relations with Washington.
Zahid Hussain
Some observers believe that with the questionable credibility of the present coalition government led by prime minister Shahbaz Sharif, the military leadership is getting increasingly involved not only in economic matters but also taking initiative in reviving relations with Washington.
Earlier this month, the prime minister’s adviser — Tariq Fatemi — also met the US deputy secretary at her office and conveyed a similar message. Later, both sides issued separate statements, saying that economic matters were discussed in the meeting. But curiously, a few days later a statement issued by the Pakistan foreign ministry clarified that Fatemi’s visit to Washington was not official. That shows complete disarray in the government’s handling of foreign policy. That may have also been a reason for the military chief taking charge.
As a part of his initiative Gen. Bajwa last week also phoned United States Central Command (CENTCOM) Commander Gen. Michael Erik Kurilla expressing his desire to strengthen relations with Washington in all fields The conversation between the two military leaders took place days after Gen. Bajwa had reached out to the US deputy secretary of state.
Historically, the engagement between Washington and Islamabad has been narrowly framed, dictated either by short-term security interests or the imperative to deal with a common challenge. For the past several years, Washington has seen Pakistan purely from the Afghan prism. With the end of America’s war in Afghanistan, post-9/11 US-Pakistan relations have come full circle.
It’s now needed to reset Pakistan- US relations beyond the security prism. Pakistan now seeks to have a broad-based relationship. For Pakistan, the United States remains an important trading partner.
The US is Pakistan’s largest export market and a major source of foreign remittances. Pakistan has a growing technology sector that could be developed with US support. Pakistan also needs US support to achieve economic stability.
But the re-setting of the relationship will certainly not be easy in the existing environment of distrust. To break the ice, the two countries should start meaningful dialogue to draw a framework for a new relationship.
- Zahid Hussain is an award-winning journalist and author. He is a former scholar at Woodrow Wilson Centre and a visiting fellow at Wolfson College, University of Cambridge, and at the Stimson Center in DC. He is author of Frontline Pakistan: The struggle with Militant Islam and The Scorpion’s tail: The relentless rise of Islamic militants in Pakistan. Frontline Pakistan was the book of the year (2007) by the WSJ. His latest book ‘No-Win War’ was published this year. Twitter: @hidhussain
