Identifier
Created
Classification
Origin
09ISLAMABAD343
2009-02-19 07:28:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Islamabad
Cable title:  

MORE DONOR ASSISTANCE NEEDED

Tags:  EAID EFIN ECON IBRD PGOV PREL PK 
pdf how-to read a cable
VZCZCXRO6750
RR RUEHLH RUEHPW
DE RUEHIL #0343/01 0500728
ZNR UUUUU ZZH
R 190728Z FEB 09
FM AMEMBASSY ISLAMABAD
TO RUEHC/SECSTATE WASHDC 1502
INFO RHEHNSC/NSC WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RHMFISS/CDR USCENTCOM MACDILL AFB FL
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHINGTON DC
RHMFIUU/FBI WASHDC
RUEHDO/AMEMBASSY DOHA 1621
RUEHLO/AMEMBASSY LONDON 9688
RUEHML/AMEMBASSY MANILA 3132
RUEHNE/AMEMBASSY NEW DELHI 4464
RUEHBUL/AMEMBASSY KABUL 9839
RUEHLH/AMCONSUL LAHORE 6769
RUEHKP/AMCONSUL KARACHI 1071
RUEHPW/AMCONSUL PESHAWAR 5694
RUEHAD/AMEMBASSY ABU DAHBI 3525
UNCLAS SECTION 01 OF 02 ISLAMABAD 000343 

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: EAID EFIN ECON IBRD PGOV PREL PK
SUBJECT: MORE DONOR ASSISTANCE NEEDED

REF: ISLAMABAD 305

ISLAMABAD 00000343 001.2 OF 002


UNCLAS SECTION 01 OF 02 ISLAMABAD 000343

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: EAID EFIN ECON IBRD PGOV PREL PK
SUBJECT: MORE DONOR ASSISTANCE NEEDED

REF: ISLAMABAD 305

ISLAMABAD 00000343 001.2 OF 002



1. (SBU) This is an action cable. See paragraph 8.


2. (SBU) Summary: GOP officials have told us and high-level
visitors that they have received little support from the
international donor community in recent months. A World Bank senior
economist confirmed that very little foreign assistance had reached
Pakistan lately, partly because donors were waiting for the GOP to
finalize its agreement with the International Monetary Fund, and
also because donors were waiting for the fiscal situation to
stabilize. Top GOP officials have remarked that Pakistan was
treated unfairly by the IMF when it received only five times its
quota under its $7.6 billion Standby Arrangement, and Finance
Advisor Shaukat Tarin has publicly announced his intention to ask
the IMF for an additional $4.5 billion. We request that Washington
urge the World Bank and the Asian Development Bank to disburse more
quickly, and that a Donors' Conference be finalized as quickly as
possible to stimulate a faltering economy, that can not spend its
way out of the problem. End Summary


3. (SBU) Dr. Hanid Mukhtar, Senior Economist at the World Bank,
confirmed that outside financial assistance has been slow over the
past year, due both to weak fundamentals and partly to the
International Financial Institutions standing aside while the GOP
finalized its agreement with the IMF. In the past, over half of
World Bank assistance had been in the form of budgetary support, but
this had changed since FY06-07. The World Bank had planned to
disburse $600 million in FY 2007-08, but due to worsening
macroeconomic fundamentals, this money did not materialize. The GOP
then asked them for a stabilization loan, but at the last minute the
Bank was advised not to do so because the IMF program was being
negotiated.


4. (SBU) The Bank is planning to disburse $500 million in new
money for budgetary support in March, however, once the IMF review
is complete. Mukhtar said that the World Bank has a $2 billion
pipeline which, in theory, could be disbursed by end-June; it

includes $300 million for the Benazir Income Support Program,
$90-$100 million for power sector development, and $500 million
(over several years) for the National Trade Corridor. He predicted
that a realistic estimate of the amount that the GOP would receive
by the end of the fiscal year would be $700 million - the $500
million in budgetary support plus $100 million each for education
projects in the Sindh and Punjab, which are contingent on policy
framework changes by these states.


5. (SBU) He noted that the bulk of Pakistan's foreign assistance
comes from multilateral sources, and acknowledged that the Asian
Development Bank had been slow in disbursing its funds as well. In
bilateral terms, Saudia Arabia has not provided deferred oil
payments (which it had done in the past) for over one year, the UAE
has not come through with oil assistance, and China's $500 million
was a deposit in the central bank, on which interest must be paid.
Many donors have expressed reluctance to give straight budgetary
support, preferring to spend money on projects over which they have
more control. Zardari has told us, however, that the United Arab
Emirates has promised him significant financial assistance, although
this has yet to materialize.


6. (SBU) As the IMF conditions have begun to pinch the economy,
GOP officials have become more vocal about their need for additional
funds. State Bank Governor Raza told DCM February 2 (reftel) that
the Fund's Standby Arrangement was unfair, as Pakistan received only
five times its quota, while a country such as Hungary had received
twelve times its quota from the Fund, and that Pakistan intended to
ask the Fund for more money once a successful review was concluded.
Finance Advisor Shaukat Tarin told the press that he intended to
request an additional $4.5 billion from the Fund.


7. (SBU) Comment: Given that Pakistan's foreign exchange reserves
have stabilized, the GOP has to make the case that the volume of
drawings from the IMF is insufficient. However, the GOP and the IMF

ISLAMABAD 00000343 002.2 OF 002


agree that expanded development assistance is needed in the short
term to mitigate the impacts of balance of payments adjustment. The
IMF resident representative (protect) said as donors' conference
sooner rather than later was important, and, while all assistance
was welcome, budgetary support was particularly crucial. End
Comment


8. (SBU) Action Request: Especially now that it appears that the
GOP will meet many of the Fund's targets for release of the second
tranche of the Standby Arrangement (reduction of the fiscal deficit,
higher interest rates, increased tax collections),we request that
SCA approach Treasury to encourage the quick disbursal of World Bank
and Asian Development Bank commitments. We also ask that the
Department approach the United Arab Emirates to encourage them to
release their promised assistance as quickly as possible. Early
action on appropriations for the USG contribution to the donors'
conference is also needed.


PATTERSON