U.S. BACKS BILLIONS OF NEW AID FOR PAKISTAN.
The US said yesterday it would support billions of dollars worth of new loans to Pakistan for the coming year and support generous terms for Paris Club debt restructuring, reports Reuters. "We intend to support negotiation of a new three-year $2 billion program with the IMF for Pakistan," US State Department spokesman Richard Boucher is quoted as saying. "In addition, we'll also support a range of important products and programs financed through the World Bank and the ADB that could total $2 billion in the next year."
"There's a lot of money in the pipeline," Agence France-Presse also quotes Boucher as saying. Noting that Washington was targeting Pakistan's mountainous debt, offering economic aid and backing support from international financial organizations, Boucher said, "All these programs totaled up, you get well over one billion from the US government. You can get several billion dollars coming from the international aid organizations."
In related news, the Washington Post (E1) reports that with many U.S. clothing and fabric companies canceling orders from Pakistan because of instability there, the Bush administration is seeking authority from Congress to sharply reduce duties on imports of Pakistani textiles and apparel, administration officials said yesterday. But it isn't clear how far the U.S. administration can go in helping Pakistan, a crucial ally in the war against terrorism, because the U.S. textile industry and its powerful allies in Congress are deeply resistant to moves that might increase competition from low-cost imports and threaten jobs in the United States.
The initiative is aimed at resolving a potentially explosive problem that pits the administration's foreign policy goals against its trade objectives. On the one hand, U.S. officials are anxious to show the Pakistani government and public that Washington will reward Islamabad for its support and will help minimize the damage to the Pakistani economy stemming from the war in neighboring Afghanistan. On the other hand, the White House badly wants to secure congressional approval of authority to negotiate broad new trade agreements -- and by opening the door too wide to textile imports, it could lose desperately needed votes from textile-state lawmakers.
The U.S. administration has already agreed to provide various forms of financial aid to Pakistan, including a partial rescheduling of the debt that nation owes to the United States, and the administration is also backing plans by the International Monetary Fund and the World Bank to lend hundreds of millions of dollars aimed at easing the nation's economic woes. But those acts of largess could go for naught if the United States is perceived as standing idly by while Pakistan's textile and apparel industry -- the nation's biggest industrial sector -- goes down the tubes.
"It's a volatile region, of course, and the stability of the region is very important," While House spokesman Ari Fleischer said, reports the Wall Street Journal (A4). "And that's always foremost in the minds of the planners."
Reuters says Boucher noted that signing a new pact with the IMF would make the nation eligible for Paris Club debt rescheduling of part of its $12.2 billion debt to Paris Club countries, adding, "The US will support generous terms for this rescheduling to ease Pakistan's external debt burden."
Pakistan is seeking an unprecedented debt rescheduling agreement with the Paris Club that would extend help on terms usually reserved for much poorer countries, notes the Financial Times (p.4). If approved, Pakistan would see the maturity of its government debt extended for up to 40 years and its interest payments reduced. That would cut debt servicing costs from more than 60 percent of budget revenues to close to 50 percent.
The deal is part of a package being pursued by foreign governments to reward Pakistan for its support of the international coalition [against terrorism], the story says. Large bilateral creditors, including the US, are said to have ruled out writing off debt outright, but are seriously considering the current proposal.
It would mimic a more generous rescheduling Paris Club agreement known as the "Naples terms"-usually reserved for very poor countries with no access to global capital markets. US officials are understood to have stressed that this would be a one-off deal, discouraging other governments from asking for similar treatment but leaving creditors open to accusations of political bias in their dealings with heavily indebted countries.
Pakistani Finance Minister Shaukat Aziz said General Pervez Musharraf was supporting the international coalition as a matter of principle. "There is no quid pro quo," Aziz is quoted as saying. "The president took the decision without a shopping list. But our friends and allies appreciate the challenges we face and we have been able to convince them of the impact [the military campaign] has had on us."
In a separate report, AFP notes that Pakistan's central bank warned yesterday that growth for the 2001-2002 fiscal year could be as low as 2.5 percent because of the impact of the conflict in neighboring Afghanistan. The State Bank of Pakistan, in its annual report, said it had based its forecast on a World Bank report which predicted that the current global crisis would cut growth rates in developing economies by an average of between 0.5 and 0.75 percentage points. Pakistan today pushed for an early end to the US military strikes against Afghanistan even as Washington considered new steps to force Osama bin Laden and his Taliban protectors from mountain strongholds into the open, notes Reuters in a separate report. "We would like it to be concluded sooner than later," Aziz told a gathering of about 800 business leaders at World Economic Forum's East Asia Summit. "No government can be imposed by the outside world on Afghanistan. The people of Afghanistan have to decide what the political future of the government will be," he added.
Meanwhile, complicating efforts to lay plans for a new regime in Afghanistan, Iran said it would oppose any move to allow exiled former King Mohammad Zahir Shah to return to his homeland even in a symbolic role, reports the Wall Street Journal Europe (p.9). Iranian Foreign Minister Kamal Kharazi set out Tehran's views in conversations with three EU foreign ministers over the past two weeks, diplomats said as the 15 EU foreign ministers met yesterday to discuss the diplomatic maneuvering underway to help form a coalition government to replace the Taliban regime in Afghanistan.
"Their solution of choice would not be the return of the king," EU High Representative for Foreign Policy Javier Solana. "But that doesn't necessarily mean they would be opposed to a return if that were the consensus." Still, French political scientist Dominique Moisi said that convincing Iran to accept the exiled king would not be so easy. "This makes things much more complicated," he said, noting that the king "is pretty much the only symbol of legitimacy who holds out much hope of bringing the nation together."
DROUGHT-HIT CENTRAL ASIAN STATES FACING FAMINE. While the world's attention is focused on war in Afghanistan, three successive years of severe drought have created conditions for a famine which is threatening neighboring Central Asian countries, reports the Guardian (UK). Triggered by the lowest rainfall in living memory, vast tracts of Iran, Uzbekistan, Pakistan and Tajikistan are being reduced to desert as the water table sinks, long-established wells dry up and herds of livestock perish.
In Tajikistan, the UN has appealed for aid to avert disaster. "Substantial foreign aid is needed or else there will be a large-scale famine," said Matthew Kahane, the UN's humanitarian aid coordinator, speaking from the capital, Dushanbe. "The country has had its lowest rainfall for 75 years."
The drought is exacerbated by another man-made ecological disaster in the nearby Aral Sea-once the world's third largest inland expanse of water-which was heavily exploited for irrigation to boost cotton production under the Soviet regime and is now close to drying up. In May, the Uzbek government appealed to the World Bank, the UN and the international community for urgent help to overcome food and water shortages. "Low rainfall and a heat wave caused water levels to fall further," the government in Tashkent noted. "This year the catastrophic shortage of water is on a larger scale. During the dry months, the Amu Darya river disappeared in the desert before even reaching the Aral Sea."
Even before Osama bin Laden's attacks on New York and Washington, the story notes, the UN had begun coordinating international efforts to tackle the gathering disaster. The UNDP convened a meeting on drought mitigation in Iran during the summer bringing together experts from Afghanistan, India, Iran, Pakistan, Tajikistan and Uzbekistan.
The news comes as Libération (France, p.10) reports that since the September 11 terrorist attacks, the international financial institutions have rushed to the former Soviet states of central Asia that have been swept up in the Afghan crisis. The ADB has just held a seminar of experts, with a view to preparing the way for a conference at the behest of the US that will bring together the ADB, the World Bank, the IMF and G8 representatives.
The presidents of the international financial institutions wrote to their member states on October 9 to warn them of the "great economic vulnerability of South Asia and the central Asian republics," the story says. Indian economist Rajiv Kumar adds, "The presence of important energy resources [gas, oil, carbon, hydroelectricity] in the republics of the former USSR must not obscure the fact that all of these states have suffered serious economic decline since independence in 1991. At least 50 percent of their populations lives below the poverty line."
One question is how to use credits that the international community is preparing to release, the story notes, adding that in the former Soviet republics, the World Bank, the IMF and the ADB want first and foremost to accelerate the transition towards a market economy, and the complementary relation between the hydrocarbon-rich desert states-Kazakhstan, Turkmenistan and Uzbekistan-and the mountain states rich in water and hydroelectric potential-Kyrgyz Republic and Tajikistan. But the current crisis risks diverting money towards military spending and security, the story says. Pakistan, which spends 30 percent of its budget for defense (and 40 percent on debt servicing) is the example not to be followed.
In a separate report, Libération notes that Afghanistan is the economic "black hole" of the region. There are no reliable statistics for its economy, and the currency is a phantom currency. The last international loans to the country date back to 1979, before the Soviet invasion, and no IMF or ADB missions have been to visit ever since.
The reconstruction of the country, if stability returns, will therefore require the equivalent of a Marshall Plan, the story says, noting that the World Bank has begun to seek out economists among exiled Afghans who might be willing to go to Kabul as soon as the war ends.
Meanwhile, the Financial Times (p.2) reports that at a meeting yesterday, EU foreign ministers recognized the central Asian states as crucial to stability in the region amid the US-led strikes on Afghanistan. But stability is one thing, says the story. Contributing in practical terms-in a region plagued by poverty, deteriorating healthcare and social services, serious environmental degradation and authoritarian governments-is something the Europeans are far from equipped to do.