Author: Sonia Trikha
Publication: The Indian Express
Date: June 16, 2001
Economic sovereignty virtually pledged
to IMF
Pakistan, it turns out, has done
more than mortagage its security with a historic Rs 2 billion-cut in its
defence outlay ahead of the July 14 summit. In a document signed by the
Pakistan Finance Minister Shaukat Aziz and Governor of State Bank of Pakistan
Ishrat Husain, it has virtually pledged the country's economic sovereignty
to the International Monetary Fund. The cost of Kashmir is finally catching
up with Pakistan.
Aziz, who announced yesterday that
his country's ''sovereignty and credible deterrence will never be compromised'',
along with Husain has signed a Memorandum on Economic and Financial Policies
(MEFP) to the IMF for approving a stand-by arrangement of SDR 465 million.
Aziz writes that ''in support'' of the policies set out in MEFP, Pakistan
''requests'' IMF's executive board to approve the arrangement.
The Aziz-Husain signed document
is addressed to Horst Kohler, IMF'S Managing Director. It lays outs out
in micro and macro detail each move of the Pakistan economy for the next
several years as designed to please the Fund's dictates. The fine print
apart, it is the abject language which evokes a nation caught in the throes
of financial crises and under pressure from the international lending agency
to clean up its act.
How far a country is willing to
commit itself is a measure of its desperation and Pakistan appears willing
to make sweeping promises. In the manner of a student writing imposition
in class, the document pledges ''it (Pakistan) stands ready to take any
additional steps that may be necessary and will consult with the Fund on
this matter in accordance with the Fund policies on such consultations''
for this purpose of loan approval.
Aziz made a virtue out of a necessity
when he announced the defence cut but IMF had already dictated that. In
the MEFP, Aziz records that ''adequate expoenditure control mechanisms
have been put in place to ensure that the defence budget stays in place''.
Aziz has also promised that the Pakistan Ministry of Defence's progressive
monthly expenditures will be monitored ''closely'' and its results will
be reported quarterly the Fiscal Monitoring Committee of the Ministry of
Finance. There's more. Any transfers of allocations will not be permiited
without Aziz's Ministry approving it.
Pakistan has raised its development
spending by 0.4 per cent. It is already listed in the MEFP as doing so.
According to analysts, this surrender of sovereignty is the price Pakistan
is paying for not only Benazir Bhutto and Nawaz Sharif's past political
corruption scandals but also for General Pervez Musharaf's current ambition
of keeping the military dictatorship in power. But it is not clearly not
paying off. In November last year, when this document was signed Aziz had
guaranteed a GDP growth objective of 4.5 per cent. According to the Economic
Survey for 2000-2001 growth was a little more than half that, 2.6 per cent.
Pakistan's foreign service debt
obligations are more than $37 billion with reserves of only $1 billion.
The ride will only get rougher as the IMF cracks down on Pakistan to meet
its fiscal targets for securing a subsequent three-year loan. Fiscal discipline
as set out in the MEFP demands a 1.3 per cent cut in budget deficit.
------------------------------------------------------------------------
Cut in defence spending won't affect
purchase power
Gaurav C. Sawant
New Delhi, June 19: THE Rs 2 billion-cut
in Pakistan's defence spending will have little effect on its military
procurement since most of its equipment is acquired mainly from China and
on long term credit.
According to defence analysts here,
more than 70 per cent of Pakistan's defence procurement is from China and
on soft loans. ''So a cut of Rs 2 billion will not affect the purchases,''
says an official. ''Pakistan has burnt its fingers with USA on the supply
of F-16 fighter jets. France is reliable but the French aircraft (Mirage
III and 5) are very expensive. Therefore Pakistan has for over two decades
been focusing more and more on China,'' he adds.
Pakistan has been spending more
on its air force since it perceives it to be a strategic force to counter
India's numerically stronger Army, Navy and Air Force. Secondly, Pakistan
has already acquired T-80 tanks from Ukraine and Agosta class submarines
from France. Therefore, analysts feel their focus would be on upgrading
and strengthening its air power.
In fact, Pakistan and China are
''jointly producing'' the Sabre-2, new fighter aircraft called the Super-7
(FC-1), sources say. Pakistan is learnt to be touting the Super-7 as its
aircraft of the future and a direct rival of India's own Light Combat Aircraft
(LCA). ''Pakistan and China are already collaborating on the Pak jet trainer.
Pakistan has been a full partner in the development of the Chinese Nanchang
Aircraft Manufacturing Company in the production of the Basic Jet Trainer
now called the Karakoram-8 (K-8) trainer,'' they add.
Pakistan has also acquired Chinese
HQ-2b and PL-9 surface-to-air missiles, apart from more than 350 integrated
gun missile air defence system. According to an official at Air Headquarters,
Pakistan is acquiring a lot of Russian technology through China. ''China
is excellent in reverse engineering. They buy an aircraft, strip it down
and manufacture its components to put together an aircraft giving it a
Chinese name. These aircraft will soon form the backbone of the Pakistan
Air Force (PAF),'' the official says. Pakistan had acquired 40 F-16 fighter
jets from USA in 1981 for $ 1.2 billion. However, the US stopped its foreign
military sales to Pakistan in the late 80s. Therefore, Pakistan could not
acquire additional F-16s or the Airborne Warning and Control System forcing
it to look elsewhere. Pakistan relied on the purchase of Dassault Mirages
to counter vastly larger Indian Air Force (IAF) and has probably around
120 plus Mirage III and 5 even today but the bulk of its air force is formed
of the Chinese make F-7 P, F-6 and Q-5 jets.
''The reliance on China is understandable
since France would demand precious dollars which Pakistan does not have.
USA will not provide weapons due to sanctions, which Abdul Sattar, Pakistan's
foreign minister wanted lifted even today while speaking at Washington.
The Shenyang F-6, which were the backbone of PAF are also being replaced
by high technology though depleted fleets of F-16 'Fighting Falcon', but
mainly by the less sophisticated Nanchang Q-5 III Fantan and Chengdu F-7
P (Skybolt). The IAF, however, remains dismissive of Pakistan's acquisitions.
''This increase in numbers may be valuable for them but PAF is still both
qualitatively and quantitatively inferior to us,'' says an IAF official
confidently.
