Asia Times: India/Pakistan


	June 14, 2002	atimes.com

India/Pakistan

World Bank aid gives Musharraf another
By Nadeem Malik

World Bank aid gives Musharraf another By Nadeem Malik ISLAMABAD - After a scare of renewed sanctions by Western countries to squeeze out more concessions, Pakistan has been able to win crucial World Bank support to carry out structural reforms.

"The World Bank board of directors today endorsed the institution's strategic road map for continued engagement with Pakistan and approved a $500 million credit to support the ongoing implementation of Pakistan's reform program and debt-reduction strategy," the bank said in an announcement after an executive board discussion in Washington on Tuesday.

Fears of a new phase of international economic embargoes were high in Pakistan last week when the United Kingdom lobbied to block new multilateral flows for Islamabad unless India was satisfied over Islamabad's pledge to control cross-border infiltrations. According to diplomatic circles in Islamabad, New Delhi discussed this issue with British Foreign Secretary Jack Straw, who visited the subcontinent recently. India also urged US Deputy Secretary of State Richard Armitage last week to support such punitive measures.

However, the United States shot down such actions that could isolate and destabilize President General Pervez Musharraf in the fight against terrorism. Musharraf also promised to "do whatever it takes to stop incursions in Indian-held Kashmir, and to fight against terrorism", in return for international support.

Pakistan has received substantial support from international financial institutions in return for joining the anti-terror campaign. In recent weeks, however, Islamabad has become entangled over the issue of its support for the struggle in Kashmir for independence from India. Musharraf announced that he would continue to provide political, diplomatic and moral support to the Kashmiri movement, but he has ordered troops in the embattled Kashmir region to enforce a complete ban on cross-border movement.

In the face of a growing war threat, and the West's blunt support for New Delhi, Musharraf has been under pressure to make such a politically risky gesture. Pakistan fought two of its three wars with India over the past 50 years over the disputed Kashmir region. Such an about-face has now obviously further antagonized Musharraf's relations with the right-wing religious forces in the country who want to oust him for supporting the US against Taliban regime in Afghanistan.

However, Musharraf's gestures have helped put pressure on New Delhi to reciprocate with some sort of concessions of its own to clear the war clouds that have loomed large for the past six months, ever since a suicide raid on India's parliament on December 13. From Pakistan's point of view, an important "victory" would be to force India to internalize the Kashmir issue, which New Delhi has consistently refused to do, but which has been Pakistan's main objective since independence in 1947. Now US-led mediation is in progress that may allow this to happen.

US Defense Secretary Donald Rumsfeld is the latest on the list of international visitors to have talked with India and Pakistan on them negotiating a workable mechanism that could lead to the resumption of political dialogue over all outstanding issues that divide the two countries. Rumsfeld met Indian Prime Minister Atal Bihari Vajpayee on Wednesday with a clear message to disengage India's troops from the borders with Pakistan.

Sources in Islamabad maintain that the recent Almaty security summit was the most decisive event in breaking the ice. Russian President Vladimir Putin took the lead in appeasing the two sides, and for the first time Vajpayee had to agree on a monitoring mechanism of the Line of Control (LoC) as a safety valve to ensure peace in the region. Senior diplomats in Islamabad believe that this also marks a new beginning in Islamabad-Moscow relations.

The declaration by the members of the Conference on Interaction and Confidence Building Measures in Asia (CICA) at Almaty was also seen as reassuring for Islamabad. It opposed supporting separatist movements in any of the 16 signatory nations, but recognized the rights of people under foreign occupation and the right of self-determination for those areas that had been recognized under the United Nations Charter. The Kashmir issue was one of those. At Almaty, Pakistan once again reiterated its position to support all international efforts for ensuring peace in the region and that it opposed all kinds of terrorist acts.

This followed the visit by Armitage, who promised not to dump Pakistan, as was being suggested by the United Kingdom, as long as it supported US policy objectives in the region, mainly the war on terrorism. The US is a major shareholder at the Bretton Woods Institutions, and its support cleared the way for new multilateral flows for Islamabad.

The World Bank also discussed the new Country Assistance Strategy (CAS) for Pakistan, which will guide the bank's work over the next three years - 2002-04. The CAS focuses on supporting those key reforms that will put the country on a path of sustainable growth needed to generate the resources for improvements in education and health. The US$500 million Second Structural Adjustment Credit provides balance of payments support and is triggered by a number of reforms already under implementation, including governance improvements and increased expenditures on social service delivery, such as education.

"Today we look forward to continuing our support to Pakistan," said John Wall, World Bank country director in Islamabad.

The World Bank also invited 23 countries to join the Education for All Fast Track to help developing countries meet the Millennium Development Goal of providing every girl and boy with quality primary education by 2015. Pakistan is included in this program. By helping the selected countries to strengthen the quality and delivery of their education systems, and to remove key bottlenecks in school completion, some 17 million children who do not now attend school in these countries will have the opportunity to complete primary education. Out of the 23, five countries are those with the largest numbers of children not in school, namely India, Pakistan, Bangladesh, the Democratic Republic of Congo and Nigeria. Together these five countries account for 50 million of the estimated worldwide total of 113 million children out of school.

The Asian Development Bank also approved a three-year Country Assistance Strategy for Pakistan on May 31, indicating $2.4 billion financing in support for the Poverty Reduction and Strategy Paper, which was finalized as part of the Poverty Reduction and Growth Facility of the International Monetary Fund.

However, a major performance criterion of all the multilateral assistance under the CAS is the restoration of democracy by this October, as was mandated by the Pakistan Supreme Court when it approved Musharraf's bloodless coup of October 1999. International finance institutions had strongly conveyed to Islamabad that respective poverty programs would be finalized with the new elected government. In the event of this not happening, fresh aid promises would be hard to find.

Pakistan's official foreign-exchange reserves have risen to $5.6 billion, its current account surplus is up to $2 billion and the rupee has appreciated by almost 7 percent - to Rs60 to the dollar - since Islamabad's decision to support the international community in the fight against terrorism.

However, sustaining these gains, including a reduction in total external debt from $38 billion to $36 billion, will largely depend on continued support from the major bilateral and multilateral creditors. For this, Pakistan has to make room for concessions in its foreign-policy goals in return.

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