Identifier
Created
Classification
Origin
08KARACHI358
2008-06-05 06:44:00
CONFIDENTIAL
Consulate Karachi
Cable title:  

KARACHI -- SENATOR CASEY MEETING WITH STATE BANK

Tags:  EFIN EAGR EPET ECON PGOV PREL PK 
pdf how-to read a cable
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RUEHPW/AMCONSUL PESHAWAR 4395
RUCPDOC/DEPARTMENT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEKJCS/SECDEF WASHDC
RHEAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEAIIA/CIA WASHDC
RHMFISS/CDR USCENTCOM MACDILL AFB FL
C O N F I D E N T I A L SECTION 01 OF 02 KARACHI 000358 

SIPDIS

E.O. 12958: DECL: 06/03/2018
TAGS: EFIN EAGR EPET ECON PGOV PREL PK
SUBJECT: KARACHI -- SENATOR CASEY MEETING WITH STATE BANK
GOVERNOR

Classified By: Kay Anske, Consul General, 1.4 b and d

C O N F I D E N T I A L SECTION 01 OF 02 KARACHI 000358

SIPDIS

E.O. 12958: DECL: 06/03/2018
TAGS: EFIN EAGR EPET ECON PGOV PREL PK
SUBJECT: KARACHI -- SENATOR CASEY MEETING WITH STATE BANK
GOVERNOR

Classified By: Kay Anske, Consul General, 1.4 b and d


1. (C) Summary: On May 27, U.S. Senator Robert Casey (D-
PA) and the Consul General (CG) met with State Bank of
Pakistan (SBP) Governor Dr. Shamshad Akhtar. Dr. Akhtar said
that the country's economy is suffering from rising oil
prices and suggested creation of a lending pool for
developing countries from the revenues of the oil producing
countries. She said counterfeiting of the rupee in
Afghanistan and the tribal areas has become a problem.
According to her, political instability is behind the
country,s capital flight and depreciating currency. She
moved to raise the interest rate 150 basis points (to 12
percent) on May 23 to counter increasing inflation (including
food prices) and shore up the rupee. She questioned the
ability of new Finance Minister Naveed Qamar to address the
country,s economic problems or strengthen Pakistan,s
macro-economic indicators. Dr. Akhtar said she had recently
been told by the Finance Minister that SBP autonomy was going
to be curtailed?. She added that she is considering vacating
her post before the expiration of her term in December. End
summary.

Rising Oil Prices Concern Governor
--------------


2. (C) On May 27, U.S. Senator Robert Casey (D, PA) and the
Consul General (CG) met with State Bank of Pakistan (SBP)
Governor Dr. Shamshad Akhtar at her office in Karachi. The
Governor told the Senator that the Pakistani economy had been
negatively impacted by the global increase in oil prices.
This caused the country,s fiscal deficit to balloon from USD
2 ) 3 billion to USD 10 billion.


3. (C) Dr. Akhtar said that the cost of Pakistan,s oil
imports has risen by 55 percent since oil prices began their
upward spiral. She warned that the resulting fiscal deficit
has the potential to eliminate all the past achievements of
developing countries in eliminating poverty.

Assistance in Funding Fuel Purchases
--------------


4. (C) She called for IMF or World Bank financing for
developing countries to help abate the impact of increased
oil costs. Dr. Akhtar also suggested that oil exporting
countries use their increased revenues to set up a reserve
that developing countries could borrow from, at concessional
rates, to finance oil purchases.

Counterfeiting a Growing Problem
--------------


5. (C) Dr. Akhtar said the GOP is concerned about
widespread counterfeiting of its banknotes, which occurs
primarily in Afghanistan and in the tribal areas of Pakistan.
Authorities have found a number of consignments of the fake
currency, and the SBP has requested a Federal Investigation
Agency (FIA) inquiry. According to Dr. Akhtar, much of the
counterfeiting is perpetrated by terrorists using the
country,s porous borders to move the bogus money from India
and Afghanistan. She asked for the Senator,s help in
promoting new financial crime legislation in Pakistan.

Capital Flight and Currency Depreciation a Problem
-------------- --------------


6. (C) The Governor pointed to an increase in capital
flight from Pakistan in the wake of the Benazir Bhutto
assassination. She also cited Bhutto's assassination and the
state of emergency as contributing to t