Identifier
Created
Classification
Origin
08ISLAMABAD1534
2008-04-11 02:58:00
CONFIDENTIAL
Embassy Islamabad
Cable title:
AMBASSADOR AND FINANCE MINISTER DAR DISCUSS PAKISTAN'S
how-toVZCZCXRO9386 PP RUEHLH RUEHPW DE RUEHIL #1534/01 1020258 ZNY CCCCC ZZH P 110258Z APR 08 FM AMEMBASSY ISLAMABAD TO RUEHC/SECSTATE WASHDC PRIORITY 6455 INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC RUCPDOC/DEPT OF COMMERCE WASHINGTON DC RHEBAAA/DEPT OF ENERGY WASHINGTON DC RHEHNSC/NSC WASHINGTON DC RUEAIIA/CIA WASHDC RUEHLH/AMCONSUL LAHORE 5286 RUEHKP/AMCONSUL KARACHI 9540 RUEHPW/AMCONSUL PESHAWAR 4014 RHMFISS/CDR USCENTCOM MACDILL AFB FL RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL RUEKJCS/SECDEF WASHINGTON DC
C O N F I D E N T I A L SECTION 01 OF 02 ISLAMABAD 001534
SIPDIS
SIPDIS
E.O. 12958: DECL: 04/10/2018
TAGS: PGOV ECON EFIN EINV PREL PK
SUBJECT: AMBASSADOR AND FINANCE MINISTER DAR DISCUSS PAKISTAN'S
ECONOMIC SITUATION
Classified by: Ambassador Anne W. Patterson for reasons 1.4 (b) and
(d)
Summary
-------
C O N F I D E N T I A L SECTION 01 OF 02 ISLAMABAD 001534
SIPDIS
SIPDIS
E.O. 12958: DECL: 04/10/2018
TAGS: PGOV ECON EFIN EINV PREL PK
SUBJECT: AMBASSADOR AND FINANCE MINISTER DAR DISCUSS PAKISTAN'S
ECONOMIC SITUATION
Classified by: Ambassador Anne W. Patterson for reasons 1.4 (b) and
(d)
Summary
--------------
1. (C) Summary: Ambassador met with newly-appointed Finance
Minister Mohammad Ishaq Dar (PML-N) April 8. Pakistan's current
fiscal crisis and need for fiscal austerity shape Dar's plan to ask
for a shadow International Monetary Fund (IMF) program, pending
Coalition Support Fund (CSF) payments, and outstanding payments to
U.S. energy companies Chevron and AES. EMBASSY requests that CSF
payments be moved as quickly as possible for reimbursement. Dar
recounted that he had not sought the Finance Minister position but
obviously relished his new position. Dar departed April 9 for the
spring World Bank/IMF meetings in Washington. End Summary.
Dar seeks a shadow IMF program
--------------
2. (C) The Ambassador met April 8 with newly-appointed Finance
Minister Mohammad Ishaq Dar of the Pakistan Muslim League-Nawaz
(PML-N). Dar departed April 9 for the spring World Bank/IMF meetings
in Washington. Pakistan's worsening fiscal and current account
deficits are Dar's principle concerns, pointing out that the previous
government had "not left him with a clean slate" and had made
economic decisions "based on political expediency." Dar told the
Ambassador that he plans to ask the International Monetary Fund for a
shadow IMF program to promote fiscal discipline on the new
government. (Comment: It was unclear whether Dar had discussed this
decision with other members of the coalition government. End
comment.) Dar recounted that he was seeking to impose austerity
measures across the board, including for the military. Referring to
his experience in government in 1999, he thought that, with
appropriate measures, the fiscal situation would be manageable in a
few months.
3. (C) Increased tax revenues are one way out of the fiscal crisis,
opined Dar. "The system is too regressive, and we need to focus on a
pro-poor tax regime and increase the tax base." The Ambassador
agreed, noting her surprise that there are only 1.5-2 million income
tax filers in Pakistan, with its population of 165 million.
Coalition Support Fund payments
--------------
4. (C) The Ambassador raised Coalition Support Fund (CSF)
reimbursements, and pledged to do everything possible to speed
reimbursements. (Currently CENTCOM is processing a $285.3 million
reimbursement.) The Ambassador highlighted that "the CSF
reimbursement process is not sustainable" and requested that Dar sit
down with the military, the embassy, and others to develop a more
transparent system where more of the reimbursements go to actual
military needs in the GWOT. Ambassador noted that January claims had
exceeded $200 million, or an annual rate of $2.4 billion. Dar
promised to "have a frank discussion" with the military, commenting
that the "claims should be able to be audited." He also commented
that he would revisit generally the military's procurement program
for possible cost savings as "expenditures are too high" and stressed
the "military should contribute its share to cost savings in tight
budget times."
Outstanding payments to energy companies
--------------
5. (C) The Ambassador raised outstanding payments to Chevron ($64
million) and AES ($206 million) to cover the differential between
international market prices for fuel and the far lower prices in
Pakistan. Dar highlighted the GOP's fiscal constraints but said that
he had made approximately $260 million available for payments to the
energy companies.
Comment
--------------
6. (C) Comment: As a chartered accountant, Dar is all too keenly
aware of Pakistan's current fiscal constraints and the need for
fiscal austerity and broadening the revenue base to address them.
While Dar told us that he did not seek to become Finance Minister, he
was clearly enjoying his new role. Washington interlocutors will
find Dar charming but still short on specific policies. Former
ISLAMABAD 00001534 002 OF 002
Finance Minister Salman Shah's civil service team is still in place,
and Dar did not mention whether he plans to make changes. End
comment.
PATTERSON
SIPDIS
SIPDIS
E.O. 12958: DECL: 04/10/2018
TAGS: PGOV ECON EFIN EINV PREL PK
SUBJECT: AMBASSADOR AND FINANCE MINISTER DAR DISCUSS PAKISTAN'S
ECONOMIC SITUATION
Classified by: Ambassador Anne W. Patterson for reasons 1.4 (b) and
(d)
Summary
--------------
1. (C) Summary: Ambassador met with newly-appointed Finance
Minister Mohammad Ishaq Dar (PML-N) April 8. Pakistan's current
fiscal crisis and need for fiscal austerity shape Dar's plan to ask
for a shadow International Monetary Fund (IMF) program, pending
Coalition Support Fund (CSF) payments, and outstanding payments to
U.S. energy companies Chevron and AES. EMBASSY requests that CSF
payments be moved as quickly as possible for reimbursement. Dar
recounted that he had not sought the Finance Minister position but
obviously relished his new position. Dar departed April 9 for the
spring World Bank/IMF meetings in Washington. End Summary.
Dar seeks a shadow IMF program
--------------
2. (C) The Ambassador met April 8 with newly-appointed Finance
Minister Mohammad Ishaq Dar of the Pakistan Muslim League-Nawaz
(PML-N). Dar departed April 9 for the spring World Bank/IMF meetings
in Washington. Pakistan's worsening fiscal and current account
deficits are Dar's principle concerns, pointing out that the previous
government had "not left him with a clean slate" and had made
economic decisions "based on political expediency." Dar told the
Ambassador that he plans to ask the International Monetary Fund for a
shadow IMF program to promote fiscal discipline on the new
government. (Comment: It was unclear whether Dar had discussed this
decision with other members of the coalition government. End
comment.) Dar recounted that he was seeking to impose austerity
measures across the board, including for the military. Referring to
his experience in government in 1999, he thought that, with
appropriate measures, the fiscal situation would be manageable in a
few months.
3. (C) Increased tax revenues are one way out of the fiscal crisis,
opined Dar. "The system is too regressive, and we need to focus on a
pro-poor tax regime and increase the tax base." The Ambassador
agreed, noting her surprise that there are only 1.5-2 million income
tax filers in Pakistan, with its population of 165 million.
Coalition Support Fund payments
--------------
4. (C) The Ambassador raised Coalition Support Fund (CSF)
reimbursements, and pledged to do everything possible to speed
reimbursements. (Currently CENTCOM is processing a $285.3 million
reimbursement.) The Ambassador highlighted that "the CSF
reimbursement process is not sustainable" and requested that Dar sit
down with the military, the embassy, and others to develop a more
transparent system where more of the reimbursements go to actual
military needs in the GWOT. Ambassador noted that January claims had
exceeded $200 million, or an annual rate of $2.4 billion. Dar
promised to "have a frank discussion" with the military, commenting
that the "claims should be able to be audited." He also commented
that he would revisit generally the military's procurement program
for possible cost savings as "expenditures are too high" and stressed
the "military should contribute its share to cost savings in tight
budget times."
Outstanding payments to energy companies
--------------
5. (C) The Ambassador raised outstanding payments to Chevron ($64
million) and AES ($206 million) to cover the differential between
international market prices for fuel and the far lower prices in
Pakistan. Dar highlighted the GOP's fiscal constraints but said that
he had made approximately $260 million available for payments to the
energy companies.
Comment
--------------
6. (C) Comment: As a chartered accountant, Dar is all too keenly
aware of Pakistan's current fiscal constraints and the need for
fiscal austerity and broadening the revenue base to address them.
While Dar told us that he did not seek to become Finance Minister, he
was clearly enjoying his new role. Washington interlocutors will
find Dar charming but still short on specific policies. Former
ISLAMABAD 00001534 002 OF 002
Finance Minister Salman Shah's civil service team is still in place,
and Dar did not mention whether he plans to make changes. End
comment.
PATTERSON