ISLAMABAD – A US decision to suspend $800 million (€571 million) in military aid will not affect Pakistani army operations, its spokesman said yesterday, but analysts say the move is likely to fray ties and could harm the country’s economy.
White House chief of staff William Daley confirmed on Sunday a New York Times report that the Obama administration had held off on a third of $2 billion in security aid in a show of displeasure over Pakistan’s cutbacks on US military trainers, limits on visas for US personnel and other bilateral irritants.
The US provides hundreds of millions of dollars a year to reimburse Pakistan for deploying more than 100,000 troops along the Afghan border to combat militant groups. Other funding covers training and military hardware.
The White House announcement puts $300 million in reimbursement and another $500 million in aid in question.
“The tribal operations won’t be affected” by the loss of US assistance, said Pakistan’s military spokesman, Maj Gen Athar Abbas.
“We can conduct our operations without external support.”
Some of the assistance, he said, was reimbursement for money already spent on several operations on the Afghan border rather than money for future operations.
“I don’t think there will be any significant impact from this,” he added.
Politically, however, it would be damaging to the relationship, said Pakistan’s former ambassador to the US, retired Maj Gen Mehmood Durrani, reflecting a widespread view in Pakistan that it was fighting the US’s war, for which Washington must reimburse it.
“This is something that they have to pay, and if they don’t then it’s breach of agreement and breach of trust,” he said.
The military might weather the storm, but Pakistan’s economy could be hit if Washington holds back on what is called the coalition support fund – the $300 million in reimbursement Pakistan says it is owed.
As the money is reimbursements for money already spent on military operations, it goes into the general treasury. Holding back these payments will not hurt the army but would strain the country’s finances further at a time when it is battling a deep downturn.
The money was expected by June 30th, and its delay has already bumped Pakistan’s fiscal deficit to 5.3 per cent of gross domestic product for the fiscal year July 2010 to June 2011, a finance ministry official said. With the fund, the deficit was anticipated to be 5.1 per cent.
The fund also supports Pakistan’s current account. Though the July-May current account is in surplus by $205 million, it may not be able to maintain the surplus in the long term because of rising international oil prices and lower prices for cotton, its main cash crop.
The cutback in assistance is part of a high-stakes standoff between the US and Pakistan, said Ayesha Siddiqa, an expert on the Pakistani military.
Washington has given up on winning Pakistani hearts and minds and is now counting on Pakistan’s precarious financial situation to bring it onside.
“America understands that Pakistan needs money,” she said. “Pakistan is insolvent. It cannot disengage [from the US], so eventually it will turn around.
“Military aid is just an indicator of what Americans can do. If they pull back economic aid as well, everything else would dry up.”
– (Reuters)
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