PAKISTAN FACING ECONOMIC ISOLATION AFTER COUP.
Pakistan was facing international economic isolation last night as global financial lenders cut off the new military regime off from financial assistance, reports the Guardian (p.5). The IMF said it had suspended the loan discussions it had been holding before the coup with Pakistan's Prime Minister Nawaz Sharif, and said talks would not resume until democracy was restored.
The US also hinted that future assistance would depend on how quickly democracy is restored, Agence France-Presse adds. "We need to see the direction they are going to take," said White House spokesman Joseph Lockhart when asked if Washington might lobby for the suspension of multilateral aid. "We call very clearly for the earliest possible restoration of democracy and constitutional rule in Pakistan."
The EU postponed indefinitely the renewal of a 13-year partnership accord with Islamabad, while UK Foreign Secretary Robin Cook said he would confer with Commonwealth leaders on a "collective response" to the coup, which could include economic sanctions against Pakistan.
A World Bank spokesman said meanwhile that ongoing Bank projects in Pakistan would continue, but that no new disbursements planned in the near future. The Bank is currently involved in a large-scale loan program in Pakistan, of which $2.28 billion has been paid, the Guardian notes. A further $1.3 billion of loans was agreed in principle but is now likely to be held in Washington until democracy is restored.
Under the new rules of engagement of the IMF and the World Bank, says the story, much stricter controls over lending are being exercised, with good governance being a key factor in loan packages.
The Washington Times (p.A16), the Washington Post (p.A17), the New York Times (p.A12), the Journal of Commerce (p.4), and Los Angeles Times (p.A4) also report.
Meanwhile, reports the Daily Telegraph (UK, p.18), General Pervaiz Musharraf appeared yesterday to be still working out his next move, having been taken by surprise at the level of international opprobrium over Tuesday's bloodless coup. One of Musharraf's most immediate problems is understood to be a need to persuade President Muhammad Rafiq Tarar, who is loyal to the ousted Sharif government, to use his constitutional powers to give the general legal cover so that a new caretaker government can be set up.
Military officers said Musharraf wanted to avoid imposing martial law. He and his legal team are understood to be looking for ways in which Sharif's dismissal could be constitutionally covered either by the president or by convening a session of the National Assembly and persuading its members to pass a vote of no confidence against Sharif.
The military rulers must act quickly to shore up their international finances or face a serious drain of funds at a time when reserves are worth less than two months of imports, notes the Financial Times (p.6). With reserves of only around $1.5 billion, Pakistan cannot afford to lose aid inflows or to see the unraveling of existing rescheduling arrangements of more than $4 billion, which are dependent on an IMF program being in place.
Pakistani financial officials said privately they were concerned about Camdessus's suggestion that the Fund might not lend to a government that was not democratic. "We are going to protest," one is quoted as saying. The job of the IMF is to evaluate the program, not to be involved in politics, the source added.
In an op-ed about the coup, Robert McFarlene writes in the New York Times (p.A31) that the US should
call immediately for a meeting with leaders of the European Union, China, Russia and Japan as well as India and Pakistan to develop a long-term multilateral strategy for establishing stability in South Asia. That strategy should include the naming of a full-time emissary responsible for resolving the most volatile political issue, the Kashmir dispute.
Such an outside negotiator could serve the dual purposes of finding a fair solution and providing India and Pakistan with someone to blame for the compromises they would be required to make. The strategy must also involve committing World Bank and commercial financing for roads, railroads, ports and other improvements to stimulate growth in both countries. Without a credible promise that life will get better for the average citizen, it will be difficult to achieve acceptance of a Kashmir settlement, the piece notes.