The nexus between military and financial affairs has multiple dimensions both in the US and in Pakistan. One that has come under limelight recently is the tension between the spy agencies of the two countries as regards the fate of Haqqani and other groups.
This has not only turned Pak-US relations sour, but has also created obstacles for Pakistan's economic managers who are increasingly finding it difficult to convince their counterparts at the IMF to release the remaining tranches and possibly enrol Pakistan into a new programme, in case it fails to meet the fund's conditions.
In recent past, fellow recipients of IMF's monies have criticised the Fund for giving preferential treatment to Pakistan, despite non-compliance, under the influence of the US and its allies in the war on terror.
But at that time the Pakistan Army was engaged in full-fledged operations against Taliban groups in South Waziristan, while the Obama administration was busy formulating the exit strategy from Afghanistan in the face of domestic pressures to cut down the costs of its aggression. Therefore, a relaxed treatment on the part of the IMF, under the influence of the US lobby, was conceivable.
In line with its plans to exit from the region, the US clearly wants to breakdown the Haqqani group in North Waziristan and form an establishment of non-pakhtoons in Afghanistan, before it withdraws its forces. However, it is against the long-term objectives of Pakistan to control Afghanistan through its long-supported Haqqanis.
This is again, an India-centric approach of the Pak Army, as Northern Allies are more close to India and will provide India the gateway to landlocked Central Asian states.
Moreover, Lashkar-e-Taiba and other insurgent groups in South Punjab have long been allied with Pakistani agencies in order to keep the Kashmir conflict alive with India. In the aftermath of the Mumbai attack, India has also become more vocal against Pakistan's alleged support to the so-called Punjabi Taliban.
With India-US relations recharged with new plans to boost trade for generating employment in the latter's economy, Pakistan is being downplayed in the equation.
Now it's a catch-22 situation for Pakistan. Pakistan's tight fiscal space necessitates immediate inflows from the US in the form of the Kerry-Lugar Bill for civil support, from the release of pending Coalition Support Fund payments and from the IMF's pending tranche in the short to medium run. For the medium to long run, a new fund programme is also imperative to roll over the debt, as hefty debt repayments would start by 2012 onwards.
It is pertinent to note that with the kind of image Pakistan has in the global financial world, IMF's nod is also important for other multilateral agencies including World Bank, Asian Development Bank and Islamic Development Bank to release their respective medium-term promised budgetary support grants and loans. Even international bonds markets are afraid of extending credit to Pakistan without IMF's support.
Back in the US, the Obama administration is facing pressures from domestic sources to curtail its fiscal spending over the period of years and limit debt building. Moreover, strong relations with India are imperative for the US to support economic recovery back home.
So, it's essentially economics that is driving geopolitics. In the absence of long-pending meaningful fiscal and governance reforms in Pakistan, and unless all stakeholders including politicians and the establishment come on board on economic agenda, the chances that our agencies will bow to their US counterparts are high.
Tough political will is required to bring the economy as a top agenda, as it will corner the lobbies who are seeking economic rent for long. Barring it, we have no choice but to agree to the US agenda.
MONEY AGGREGATES
The cat is out the bag again. After resisting for a little over a quarter, the government resorted to knock the door of central bank for filling its ever increasing appetite. It borrowed a hefty Rs103 billion from the SBP for the week ending April 9.
Standing at a stock of Rs1277 billion, it's flirting close to a promise made to the SBP governor in January on keeping it below the Rs1290 billion ceiling. Though the numbers are not released, sources within the SBP revealed that by April 15 the borrowing toll has well breached the limit.
By virtue of note printing, the government will be able to retire some credit to scheduled banks as it slashed Rs26 billion to bring the year to date number at Rs322 billion.
It's a similar tale for private sector credit, as money borrowed for working capital at the peak season has started to get retired - Rs32 billion being the fall for the week ending April 9.
The currency-in-circulation increased by Rs41 billion as more notes come out of the SBP machine, while demand and time liabilities of scheduled banks reduced by Rs52 billion to make the money supply fall marginally by Rs11 billion.
(Feedback at [email protected])
==================================================================
KEY MONETARY AGGREGATES AS ON APR 9
==================================================================
Rs(mn)
==================================================================
9-Apr 2-Apr Change
==================================================================
Currency in Circulation 257,303 215,932 41,371
Total Demand & Time Deposits 271,150 323,361 (52,211)
Broad Money (M2) 532,049 543,398 (11,349)
NFA 149,058 164,477 (15,419)
NDA 382,991 378,921 4,070
Net Government Borrowing 303,489 236,841 66,648
Borrowing for budgetary support 434,468 357,372 77,096
from SBP 112,603 9,798 102,805
from scheduled banks 321,865 347,574 (25,709)
Commodity operation (134,869) (124,425) (10,444)
Credit to non-govt sector 210,795 240,862 (30,067)
to private sector 177,723 210,152 (32,429)
to PSEs 32,882 30,520 2,362
------------------------------------------------------------------
Source: SBP
==================================================================
Comments
Comments are closed for this article.