I suspect we are currently reliving the mid-2000 period. However, today the situation appears to be direr, almost of existential proportion. In June 2000 we had stood totally isolated in the world (just recall the scenes when President Clinton paid a day-long visit to Islamabad on March 25, 2000! On live television, he addressed the people of Pakistan and talked privately to President Musharraf) and were facing a potentially calamitous economic situation.
We did get an IMF Standby bailout of a paltry $ 596 million in November that year but in return, we had to agree to give up our stated position on Kashmir. This is exactly what President General Pervez Musharraf conceded publicly during his visit to Agra for a Summit with the Indian Prime Minister Atal Bihari Vajpayee in July 2001.
The US leveraging its political clout gained in India when PM Vajpayee had asked his help to get Pakistan to vacate the heights of Kargil had advised New Delhi to create conditions conducive to leading to a summit with President Musharraf for resolving the Kashmir dispute. Vajpayee obliged in August, 2000 by publicly announcing crease-fire on the Line of Control (LoC) invoking what he termed as ‘Insaniyat’ (humanitarianism). Hizbul Mujahideen, the Azad Kashmir- based main freedom fighting group reciprocated immediately (obviously on the advice of Pakistan which in fact was fulfilling one of the political conditionalities attached to the Standby Arrangement in proffering the advice) declaring a ceasefire on its behalf, then Pakistan too announced in November, 2000 that it is silencing its guns on the LoC.
With the LoC cooling off and bloodshed inside occupied Kashmir subsiding visibly, an almost ideal setting had been created for the Indo-Pak Summit. The Summit failed because according to insiders on both sides the then Indian Home Minister LK Advani was unwilling for a settlement on a give-and-take basis. I think it failed because Pakistan’s Army as an institution was also not prepared to accept such a settlement. That was why Musharraf disappointed Vajpayee by refusing to agree to include in the final draft of peace document that he ‘renounced’ militancy in Indian occupied Kashmir.
The Standby Arrangement was a front-loaded Fund programme with Pakistan agreeing in June 2000 that it would fulfill in advance by November the same year all condtionalities agreed to in the programme. The Fund Press Release No. 00/64 issued on November 29, 2000 supports the front loaded nature of Fund programme: “The Pakistan authorities have put in place an economic adjustment and reform program, for which financial support under a Stand-By Arrangement has been approved by the Fund’s Executive Board.” The disbursement of the first tranche of credit was made immediately following the issuance of the Press Release.
Ironically, a desperate General Musharraf facing a certain default had agreed to give up Pakistan’s stated position on Kashmir in due course of time in return for both US and UK withdrawing from the Fund’s Executive Board meeting convened to consider Pakistan’s application for the Standby Arrangement, as had the two attended the meeting, they would have had to oppose the application because under their respective laws the US and UK were barred from extending economic help to military regimes.
So, for a measly but much needed bail-out of no more than $596 million (Standby Arrangement) Musharraf who had rejected both Simla Accord and Lahore Declaration in 1998 when he had not yet staged his military coup and taken over the reins of the country, as being totally useless documents, especially with regard to their potential to help resolve the Kashmir dispute, publicly announced in Agra in July 2001 as the country’s President that he was prepared to give up Pakistan’s historic position that the Kashmir dispute be resolved through self-determination by conducting a plebiscite in Kashmir under the aegis of the UN.
The huge bail-out package of $6 to $12 billion that we are currently ‘negotiating’ with the Fund like the Standby of 2000 also appears to be clearly front-loaded with conditionalities, that is, the loan amount to be approved only after Pakistan had fulfilled all the economic and political conditionalities attached to it.
We now know what the attached economic conditionalities are. Since November, 2018 we have been implementing them in a phased manner: huge hikes in the power and gas tariffs, withdrawal of various subsidies, preparation of a plan for privatization of various public sector units and organisations, rupee devaluation, taking in hand a macroeconomic stabilization programme to reduce the fiscal and current account deficits in accordance with targets already set by the Fund, expand the tax base to improve tax-to-GDP ratio to at least around 13%, etc. Perhaps we have not yet been able to satisfy the Fund on CPEC loans; and the demand for market dictated exchange rate which in simple words means letting the Rupee float. Therefore, the visible delay in finalizing the loan package
What, however, we don’t know yet are the political conditionalities attached to the requested bailout package. As mentioned at the start of the column, today we are in a direr situation, almost of existential proportion compared to that of mid-2000. So, if we could give-up our stated position on Kashmir just for a measly $596 million, we wonder what we would be willing to concede politically in return for the huge loan package now being requested. One hopes no one is thinking in terms of tinkering with even an iota of our sovereignty itself in return.
One could, however, get a vague idea about what these political conditionalities would be by going through PM Imran’s recent interview to a group of foreign journalists. He had said, in his opinion, if Modi won the elections India and Pakistan could come to ‘some kind’ of settlement on Kashmir, beyond perhaps even the four-stage Musharraf and Manmohan formula agreed but not signed by the two countries just before the ouster of President Musharraf in 2008. Perhaps it is what our establishment, having read the writing on the wall, has advised the PM to agree to by way of ‘some kind’ of settlement on the basis of give-and-take. Perhaps even offer New Delhi land route to Central Asian Markets via Pakistan and Afghanistan in return for ‘any kind’ of settlement of Kashmir dispute.
The FATF pressure is also to be reckoned with at this stage of the negotiations with the Fund. The letter that the finance minister Asad Umar said he had written to FATF President sounds ominous. He is not expecting a fair and unbiased decision from FATF with India co-chairing the proceedings. He sounds as if he has already thrown in the towel.
On Friday last after having attended the spring moot of IMF-World Bank in Washington Finance Minister Asad Umar while interacting with a group of Pakistani-Americans said, the next FATF review would take place in the middle of May but the actual deadline for the final decision is September.
He said Pakistan had made significant improvements since the last review, recognised by “virtually everybody we talked to. The question mark we have is: are we going to be judged by a rigged jury?”
He said he recently wrote a letter to the FATF president asking him to appoint any other member country besides India as co-chair of the Asia-Pacific Joint Group. “The finance minister of India is on record saying that they will use every means at their disposal to economically isolate Pakistan. What better way to isolate Pakistan economically than to get Pakistan on a FATF blacklist?”