FINANCE MINISTER QAMAR REQUESTS URGENT U.S. INTERVENTION FOR ECONOMIC STABILITY

C O N F I D E N T I A L ISLAMABAD 002752



SIPDIS



C O R R E C T E D C O P Y (ADDED PARAGRAPH MARKING)



E.O. 12958: DECL: 08/19/2018

TAGS: ECON, EFIN, EINV, PGOV, PREL, PK

SUBJECT: FINANCE MINISTER QAMAR REQUESTS URGENT U.S. INTERVENTION FOR

ECONOMIC STABILITY



Classified by: Ambassador Anne W. Patterson for reasons 1.4 (b) and

(d)

1. (U) This is an action request: See paragraph nine.



2. (C) Summary: Ambassador met with Acting Minister of Finance

Naveed Qamar August 18 at his request. Qamar remarked that "we

urgently need help from you" and requested U.S. assistance in two

specific areas: lobbying the Saudi government for oil concessions in

either deferred payments or free oil and speaking up in support of an

International Monetary Fund program for Pakistan at a meeting

scheduled for August 18 in Washington. End Summary.



3. (C) Noting that the Government of Pakistan (GOP) officials had a

"minor panic" over the weekend when the new foreign reserve balance

was notified to the GOP by the State Bank of Pakistan in advance of

the upcoming public announcement, Qamar emphasized that the GOP was

seeking help from the United States to urgently address the economic

issues facing Pakistan. Qamar stated that Pakistan is "currently

faced with numerous outflows and hardly any inflows." Qamar

explained that the continued depreciation of the rupee is hurting the

economy as exporters are now withholding their earnings and money

changers are holding back dollars from the market which is creating a

"self fulfilling prophecy" of a more rapid than anticipated decline

in Pakistan's reserves level.



Support for IMF program

--------------



4. (C) Qamar noted that a meeting will be held in Washington DC on

August 18 to discuss the International Monetary Fund (IMF) program

for Pakistan. Qamar emphasized that the GOP had shared all the

necessary information with IMF representatives who visited Pakistan

last week and a "comfort letter" is being prepared by the IMF. Qamar

emphasized that the issuance of this IMF letter is imperative to

stabilize the Pakistani economy and noted that Pakistan is desperate

to have a "positive word from the American representative who will

undoubtedly have the last word." He emphasized the urgency of this

request as the meeting will be held the morning of August 18 in

Washington.



Push Saudis to Issue a Statement

--------------



5. (C) Qamar also sought U.S. assistance in helping to push the

Saudis on finalizing a deal to allow either deferred payments on oil

or free oil. Noting that Ambassador Haqqani has been engaged in

Washington, Qamar acknowledged that no progress has been made in

recent discussions with the Saudis and that with the King on vacation

in Morocco, no higher level engagement has been possible with the

Saudi government. Secretary of Finance Farrakh Qayyum emphasized

that a "categorical statement is needed" from the Saudis to assure

that "we are not just discussing modalities."



6. (C) Ambassador noted that U.S. officials have raised this issue

with the Saudis previously and inquired whether other Gulf countries

were considering any concessionary deal for Pakistan. Qamar noted

that the Saudi deal was the "most structured" and that the GOP

"needed some sort of statement from the Saudis to provide assurance

to investors and to stabilize the market." Qamar further noted that

the GOP was engaged in discussions with Kuwait and the United Arab

Emirates. He stated that the UAE discussions were "not as far along

in structure yet" and that the Kuwaitis were "quiet this time."

Qamar further elaborated that the Kuwaitis were not looking at diesel

concessions for Pakistan but were willing to discuss commercial

sales. Qayyum stated that Pakistan currently gets a "60 day deferred

payment" and that the GOP wants to stretch this to two years. But

the Kuwait Council of Ministers is only authorized to extend the

payment deferment for 90 days without "royal intervention" which has

not been forthcoming yet.



Money and Stability Needed

--------------



7. (C) Ambassador replied that the Embassy would convey these

requests to Washington immediately and further noted that the next

installment of coalition support funds has been notified to the

Congress and should be coming soon. Ambassador also noted that

moving forward aggressively on the Bilateral Investment Treaty would

provide an important signal for economic stability and investor

confidence at this critical time.



8. (C) Qamar opined that the impending announcement of President

Musharaf's resignation would also provide stabilization for the

economy. Secretary Qayyum further stated that the "GOP believes that

his resignation will shed the cloud of uncertainty for investors."



9. (C) Action Request: Post recommends SCA coordinate Department action

on the GOP request for assistance with the Saudis regarding deferred

payments on oil. Although we know that the Saudis have many

claimants, in our view, it would help both us and the Pakistanis to

know if the USD 6 billion is really in the works or just a pipe

dream. Post also recommends that EEB and SCA notify Treasury

representatives of GOP's urgent request for support at the impending

IMF meeting and to lobby for issuance of a "comfort letter" as soon

as possible. End Action Request.



PATTERSON