DEPUTY SECRETARY NEGROPONTE'S MEETING WITH FINANCE

C O N F I D E N T I A L SECTION 01 OF 02 ISLAMABAD 003821

SIPDIS

E.O. 12958: DECL: 12/11/2018
TAGS: ECON EFIN EINV PGOV PREL PK
SUBJECT: DEPUTY SECRETARY NEGROPONTE'S MEETING WITH FINANCE
ADVISOR TAREEN

Classified by: Anne W. Patterson for reasons 1.4 (b),(d)

Summary
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1. (C) Summary: On December 11, Deputy Secretary
Negroponte met with the Prime Minister's Advisor on Finance
Shaukat Tareen. They discussed the present state of
Pakistan's economy, the International Monetary Fund's (IMF)
stand-by agreement, Reconstruction Opportunity Zones (ROZs)
and the Bilateral Investment Treaty (BIT). When asked if
the BIT could still be completed during the current U.S.
administration, Tareen replied "absolutely." End summary.


2. (C) On December 11, Deputy Secretary Negroponte met with
the Prime Minister's Advisor on Finance Shaukat Tareen.
Also present in the meeting were Secretary for Economic
Affairs Divison Farrukh Qayyum, Principal Deputy Assistant
Secretary for South and Central Asia Donald Camp,
Ambassador and EconCouns.

Economic Outlook
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3. (C) The Deputy Secretary asked Tareen how Pakistan's
rupee was holding up in the current economic situation.
Tareen said that the rupee was at 78.5 to the dollar, but
that he felt it was overvalued and should actually be
upwards of 80 rupees to the dollar. The overvaluation was
due to oil payments from the central bank, but Tareen
thought that this would be resolved. Tareen went on to say
that inflation was coming down and that the sensitive price
index had declined. The trade deficit was USD 2 billion
per month, but was now USD 1.2 billion, and was expected to
go to PKR 1 billion next month.

IMF Negotiations
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4. (C) The Deputy Secretary asked if the GOP was pleased
with the IMF talks, which, he pointed out, were good for
Pakistan's international reputation. Tareen said that he
had called President Zardari and convinced him to accept
the IMF agreement due to worries over what would happen to
the foreign exchange reserves by January. Tareen continued
that the IMF had taken the GOP's "homegrown" intiatives
into account, saying that Pakistan has already initiated
some tough measures and that it was good for Pakistan to
exhibit discipline.


5. (C) Tareen suggested that the IMF could have been more
generous to Pakistan. They only agreed to five times the
quota, which provided insufficient funds to build up the
reserves, forcing the GOP to go to donors. The Deputy
Secretary assured Tareen that the USG is working on the
Donor's Conference, and determining the support other
countries might provide. He said that December was too
soon, but that a conference might be possible in early
January. Tareen relayed that both Treasury Secretary
Kimmitt and the Saudi Finance Minister had called and
indicated that mid-January would be a good time frame.
Tareen also indicated that Saudi Arabia and UAE might be
willing to securitize remittances, giving Pakistan 25
percent for 5-7 years. In this way, providing funds might
become more palatable for those countries. Tareen added
that many other countries had their own problems right now,
presenting obstacles to giving funds. Tareen thanked the
Deputy Secretary for the U.S.'s support.

Reconstruction Opportunity Zones
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6. (C) Tareen expressed his support for Reconstruction
Opportunity Zones (ROZs) pending in the U.S. Congress. The
Deputy Secretary pointed out that now that Senator Biden
was the Vice President elect, he would be a good advocate
for the bill and for Pakistan. The hope now was for
Congress to take action. Tareen and the Deputy Secretary
also briefly discussed the ongoing USAID projects in the

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Federally Administered Tribal Areas and what Tareen termed
"the slow disbursement" of the USD 750 million commitment.
Secretary Qayyum pointed out the need for visible projects,
which would also help the U.S. image. The Ambassador said
that some road building projects had received funding, but
that progress on the project had been delayed due to
security concerns.

Bilateral Investment Treaty
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7. (C) The Deputy Secretary asked about progress on the
Bilateral Investment Treaty (BIT) agreement, saying that he
thought it was in Pakistan's interest to complete the
agreement. When the Deputy Secretary asked specifically
whether the BIT could be completed before the end of the
current administration, Tareen replied "absolutely, why
not?" Qayyum added that the Law Ministry had some
reservations on provisions regarding the private dispute
resolution language and possible GOP liability if private
sector entities do not pay the debts. Tareen said "Let's
push, we have a month to finish."


8. (U) The Deputy Secretary's party cleared this cable.

PATTERSON