Can the US-Pak bilateral ties build on the progress made last year (despite some turbulence) and provide some economic breather to the latter’s embattled economy? A year ago, it was moot to even raise such a query, what with Uncle Biden refusing to even talk to then-PM Khan (despite the latter’s exhortations), amidst rising anti-China rhetoric clouding judgment in DC on merits of pushing countries to side with the US.

While the Khan followers eagerly lapped up his ‘regime change conspiracy’ narrative that allegedly ousted him from power last April, this false campaign ran afoul of diplomatic norms, threatening to completely unravel what had remained of US-Pak cooperation in security and economy. However, the new PDM government was somehow able to prevent the relationship from turning completely sour.

In fact, the Shehbaz-led government was able to not only revive US-Pak ties; it has done so without downgrading Pak-China relations. In that regard, it helped that the American establishment finally understood the futility of asking allies to snub its rivals. For instance, India has kept its relations with Russia up and running despite the latter’s war on Ukraine. Saudis are also getting cozy with the Chinese.

After high-profile meetings in DC and NYC from May 2022 onwards, the PDM government was able to secure US assistance on several fronts. After the devastating monsoonal floods in July-Sep, the US was by far the biggest bilateral donor supporting Pakistan’s Flood Response Plan (2022). The government’s breakthrough on the 7th and 8th IMF reviews under the EFF in late August also had US blessings. Post-floods, the US government also provided $132 million worth of debt relief to Pakistan in September.

In addition, the FATF white-listing couldn't have taken place last October without the American nod. The revival of security assistance (e.g. $450 million to help Pakistan sustain its F-16 program) was also a notable development. The Indian government officials made pointed public remarks protesting such developments, but they were told by their American counterparts that US-Pak ties stood on their own merit and that Pakistan was a major regional player that the Biden administration couldn’t continue to ignore.

With the economy under duress, analysts are interested in what more the US can do for Pakistan. That depends on shared interests and how far Islamabad can go to meet them. Some common areas of concern or cooperation lie in counter-terrorism space (especially vis-à-vis Afghanistan), climate change (given US climate leadership and Pakistan’s global relevance after floods-related losses), international peace (in the context of the Ukraine war), and global public health (pandemic-related future cooperation).

America’s foreign assistance – which is an indication of its interest in any country – has shrunk in recent years. In FY19, the PTI government’s first year in power, $96 million worth of grants were received from America. By the PTI’s final year in government, the US grants had gone down to $70 million. Now there are signals from DC that the mood has shifted favorably on Pakistan. The latest US budget documents indicate that grants to Pakistan are being resumed, running into hundreds of millions of dollars per annum.

While economic/social grants running into hundreds of millions are welcome (it’s free dollars that need to be utilized for specific projects), the more far-reaching help the US can provide Pakistan is in re-starting the IMF program soon. Additionally, if PM Shehbaz intends to privatize any SOEs or physical assets to shore up forex reserves, active interest by US-backed entities can help the process succeed. US leadership can also help achieve financial goals under the UN-backed donors’ conference for Pakistan floods. And lastly, considering the recent rise in terrorism in Pakistan originating from Afghanistan and the resulting US alarm, large-scale security assistance is also plausible. Let’s see what 2023 has in store.

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