Raymond Davis was whisked out of the country leading to widespread protests. The US officialdom has formally thanked the Pakistan government, which is manifest with President Asif Ali Zardari's visit to the US on the agenda again.
It has also been widely reported that the CIA has committed that it would no longer station operatives/contractors in Pakistan who would directly engage with who-ever the agency defines as a terrorist without the knowledge of the ISI; though why the ISI would not routinely monitor all 'suspects' who enter the country is beyond the norms of espionage activity.
Disturbingly, the CIA did not commit not to avenge the two month ordeal of one of its operatives which, according to heightened anger in Pakistan against the handling of the entire case, accounts for the death of 44 by CIA operated drones within 24 hours of Davis' exit from Pakistan. The US officialdom stationed in Pakistan announced Friday as a holiday, not in celebration for Davis' release but in apprehension of the calls for protests after the Juma prayers. The critical question is would the people of this country benefit in the aftermath of Davis' release and exactly how?
The government as well as the military would be quick to point to the Coalition Support Fund (US grant assistance enabling Pakistan's military to continue its fight against terrorism on its border with Afghanistan) and the Kerry-Lugar bill envisaging 1.5 billion dollars in annual US grant assistance for five years as very potent reasons. In short the US is pumping over 2 billion dollars per annum into our economy and cessation of this inflow is a hit that no government or any of its institutions can sustain. The people however may not see or feel the benefits of such heavy grant assistance due to the appallingly poor management of the economy by the incumbent government.
What plan/vision does the latest recruit to the PPP's economic bandwagon, Hafeez Sheikh, have to turn the economy around? Unfortunately the answer is more of the same. Thus Dr Sheikh is focused on continued engagement with external donors to ensure that pledged assistance, stalled due to his failure to implement the structural reforms identified by the donors, is disbursed. In over a year he has made no effort to undertake reforms in the tax system to render it more equitable (through imposition of a tax on farm income rather than taxing agri-inputs whose effects would be borne by the rich and poor farmers alike as well as the consumers) and less anomalous (with an identical industry operating in the public sector paying a different tax rate to a private concern). Dr Sheikh has also slashed development expenditure, like his predecessors, in an effort to control the deficit. Such actions are attributed not to the lack of economic prowess but to his inability to convince anyone that austerity implies belt tightening by all. And, additionally, Dr Sheikh supported heavy borrowing from the State Bank, a no-no that even a freshman economic student would resist, and it was only the deep concerns voiced by the visiting International Monetary Fund (IMF) team a couple of weeks ago and the team's linking it to the possibility of the release of the penultimate tranche that led him to back off a bit, or so argue a growing number of his detractors.
The incumbent Finance Minister, in consonance with the views of the PPP and its co-Chairman President Asif Ali Zardari, ideally wants the world to open the floodgates of assistance in the form of grants. The economic rationale is impeccable even though the request is unrealistic as has become patently evident: money as grant would raise the revenue of the government while not raising indebtedness, with an obvious favourable impact on the budget deficit. This, in turn, would enable the leadership to ensure considerably higher outlay on development, an action that would strengthen existing PPP constituencies and, no doubt, would also improve the party's standing in constituencies that are not its stronghold at present.
The rationale provided by the PPP leadership for requesting global largesse, eagerly accepted by Dr Sheikh, has ranged from demanding a democracy dividend, which was destined for failure given that the world powers were fully behind the dictator Musharraf post 9/11, and Pakistan's need for reparations for fighting the costly war on terror. Monetary assistance for fighting a war on behalf of another is not a new concept. The US received 36 billion dollars from Kuwait, Saudi Arabia and Gulf states for fighting the first Gulf War and seeking payment for fighting a war on another's behalf is therefore not regarded as being tantamount to compromising one's sovereignty.
However Pakistan's case is distinct on two counts from the Gulf war reparations that the US pocketed: (i) we are engaged in a global war against terror within our own borders; and (ii) the government as well as the armed forces have been at pains to take full ownership of the war by publicly insisting that it is our war against terrorism on our soil. Be that as it may the condition for US reparations under the CSF is our commitment to target the Afghan Taliban. It is here that differences periodically erupt between the two sides with the US claiming that the Pakistani government is not spending the CSF for the purpose it was intended: to eliminate the Afghan Taliban including those in South Waziristan, and accuse the military intelligence of providing the Afghan Taliban a sanctuary to recover from their war wounds inflicted across the border. The Pakistani side insists that it reserves the right to fight in areas of its own choosing and at a time convenient to it. This stalemate results in periodic withholding or delays in CSF disbursement but with Nato and US forces hugely dependent on Pakistan for the success of their mission in Afghanistan their policy has remained one of engagement though periodically interspersed by delays in disbursement accompanied by threats.
There is no doubt that Pakistan's decision to fight the global war on terror led to international acceptability of Musharraf, who was considered a pariah till then, as well as forming the basis for opening the floodgates of monetary assistance led by the US during the first five to six years after 9/11. Musharraf, currently resident in London, publicly and disturbingly for the military establishment as well as the general public in this country acknowledged recently that his government spent some of the CSF funds not on fighting the war with the Taliban but on maintaining a deterrence against India. This in all probability accounts for US insistence on a host of checks and balances on all disbursements to Pakistan - military under the CSF as well as non-military under the Kerry-Lugar bill.
From 9/11/2001 till the fall of the Musharraf regime in 2008, the US government extended 7.89 billion dollars as military assistance, most of it under the CSF. In addition around 3.1 billion dollars was allocated for economic and development assistance, including food aid, during the same period. The post-Musharraf Kerry-Lugar bill, though it was conceived during the Musharraf era, envisages a greater parity between assistance for the military and development assistance.
Development assistance under the Kerry-Lugar bill is not being released as envisaged. Many analysts point the finger of blame on the Raymond Davis issue. However economists argue that the slow pace of disbursement may mainly be attributable to the government's inability to put its own house in order, either in terms of implementing the politically challenging economic reforms or setting up a transparently effective accountability mechanism. In addition, high level of leakages, partly attributable to corruption, partly to incompetence and partly to a lack of commitment to reforms that are politically challenging, are deterring many a donor from disbursing pledged assistance. Thus Davis' release is unlikely to lead to accelerated disbursement under the Kerry-Lugar bill any time soon.
The IMF proactively monitors and evaluates the success of an ongoing programme unlike other donors that do so after programme/project completion. There is a consensus, that requires Pakistan to be put on the straight and narrow, and the IMF, with its quarterly reviews, is the only entity capable of doing so. It is little wonder that other multilaterals and bilaterals are insisting that the government provide a Letter of Comfort from IMF before they would release pledged assistance; and why Pakistan is forced to rely on IMF which will charge us 25.8 million SDRs this year alone without disbursing any amount.
The fault is not Davis' but that of the Finance Minister's sustained failure to convince anyone that he means business: the donors, other political parties be they in opposition or in coalition with the government, or indeed the people of this country.
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