FINANCE ADVISOR TARIN AGREES ON WAY AHEAD FOR

C O N F I D E N T I A L ISLAMABAD 000660 SIPDIS E.O. 12958: DECL: 03/24/2019 TAGS: PREL PGOV PHUM EAID ECON JA PK SUBJECT: FINANCE ADVISOR TARIN AGREES ON WAY AHEAD FOR TOKYO FRIENDS OF PAKISTAN AND DONORS MEETINGS; GOP WILL FOCUS ON $4 BILLION PLEDGE Classified By: Anne W. Patterson for reasons 1.4 (b,d) ¶1. (C) Summary: Following interventions from the U.S. and Japan, the Pakistanis have backed off plans to press a $10 billion request for the April 17 Tokyo donors conference and agreed to focus on the $4 billion target established by the IMF. Expressing a desire to "resolve his confusion," Finance Advisor Shaukat Tarin convoked the Ambassador and accepted during the meeting that the GOP should confine its request for $4-6 billion in short-term assistance to ensure the success of the conference. A day earlier, Japanese Director General Hiroshi Inomata met with Tarin who also committed to him that Pakistan would set a $4 billion target for the Conference. Having attended the March 24 MFA-hosted meeting in which the GOP rolled out a $10 billion figure, Inomata had echoed U.S. concern the GOP had overshot the mark. End Summary. ¶2. (SBU) The Ambassador and DCM met, March 26, with Finance Advisor Shaukat Tarin, who was accompanied by his economic team: Hina Rabbani Khar, Farooq Qayyum, and the new Finance Secretary, Salman Siddique. This meeting followed a session with Farakh Qayyum that DCM attended earlier in the day with the Japanese and the World Bank. On the basis of these discussions, we believe we have an agreed way forward for managing the Friends and Donors meetings in Tokyo. We see three fundamental take-aways from the meetings: a) Pledges from the donors equaling $4-6 billion over two years. Tarin is including in the high figure an agreement they are working out with the Saudis and Emiratis for securitization of worker remittances (septel),which Tarin believes can easily secure for the GOP $1b/yr. The donor pledges will focus on helping Pakistan meet its short-term budget requirements; b) An announcement by the Government of Pakistan that they are establishing the Baluchistan-NWFP Trust Fund, with a request to the World Bank that they agree to administer it; and c) An announcement by the Government of Pakistan that they are establishing a framework donors coordination group, which will be structured around sectoral issues with lead donors assigned to coordinate in each of the sectors. ¶3. (SBU) The Ambassador indicated to Tarin that the U.S. would welcome a discussion, probably in Friends, by the Pakistani side of the full measure of the development challenges that they will confront over the medium to long-term as long as there is no expectation that international donors will make pledges against those needs in Tokyo. The idea of establishing the donor coordination process will allow the Pakistanis to say that they now have a mechanism for working with the donor community on their broad development challenges going forward. We made the point that the fuller definition of Pakistani needs was actually helpful to donors in getting a better sense of Pakistan's "vision." The GOP will likely refine the document and present it again at the Abu Dhabi meeting. (Qayyum and Siddique will be leading the Pakistani team in Abu Dhabi. Planning Secretary Ashraf Hayat likely will be there as well.) ¶4. (SBU) The World Bank agreed at the earlier meeting with Qayyum that they will take the lead in preparing a short paper (2-3 pg) for Tokyo laying out the $4 billion short-term requirement that can be used as the discussion document at the Donor meeting. ¶5. (SBU) In terms of Abu Dhabi, the MFA called on March 26 to describe the way they see the meeting unfolding -- opening remarks from the Pakistanis and then seriatim presentations on each of the Friends clusters, with responses from the Friends representatives. At the conclusion, they plan to produce a brief report on the meeting that can be provided to Friends and Donor representatives before the Tokyo meeting. Post has forwarded discussion material to U.S. experts meeting delegation members to review before the meetings next week. In the meeting with Qayyum, we also discussed forming a small group to work on the Tokyo Friends joint communiqu -- the Pakistanis, Japanese, UK, and the U.S. (the World Bank was also invited, but declined to participate in the drafting). ¶6. (C) Japanese Charge Akira Mizutani briefed DCM on the March 25 meeting that visiting Japanese MFA Director General for Southeast and Southwest Asian Affairs Ambassador Hiroshi Inomata had with Shaukat Tarin. Tarin had also agreed at that time to lower the GOP's target for the Donor's Conference from $10 billion to $4 billion. ¶7. (C) Inomata, together with his Deputy Director Takehiko Wajima, Deputy Director-General for International Cooperation Masato Watanabe and Counselor Shu Nakagawa of the Japanese Embassy met with Ambassador, DCM, and DepPolCouns (notetaker) on March 24. ¶8. (C) In the March 24 meeting, Inomata shared the U.S. side's frustration with the MFA-hosted meeting (held earlier March 24) on the Donors' Conference in which the GOP produced a brochure delineating Pakistan's vision for pledges. Inomata praised the work the GOP had undertaken, but expressed his concern that the $10 billion target was "ambitious," could not be achieved, and would have the reverse effect than that intended: it would make the Donors' Conference look like a failure (and by extension, make the GOP appear weak). ¶9. (C) Ambassador and DCM agreed with Inomata's view and urged him to use his meetings with senior GOP interlocutors to walk the GOP back to a more acceptable (and achievable) figure. The two sides agreed to press the Pakistanis to stay with the IMF-proposed $4 billion target although we would accept the $5 billion figure preferred by the GOP. ¶10. (C) The USG pledge, explained Ambassador and DCM, would target the social sector, including earmarks for education and in support of the Benazir Bhutto income support program. The Japanese, said Inomata, had also understood the Donors' Conference was meant to serve in the "near term" to help meet the immediate social safety net needs adversely affected by the IMF agreement. The GOP's presentation, said Inomata, was based more on the "medium term" and covered all of Pakistan's development needs for the next three years. ¶11. (C) The two sides also compared notes on likely donor responses to the request. The Ambassador cautioned that the Norwegian Ambassador had told her the big European nations might pledge low by routing the "European Pledge" through the EC, rather than pledging as individual nation states. ¶12. (C) Comment: In typical fashion, the Pakistanis tied themselves in knots over the Tokyo meetings and what they hoped to accomplish. Their confusion reflected not only the endemic institutional conflict within the GOP, but also the mixed political signals from their senior leadership and a degree of uncertainty about the interrelationship between the Friends of Pakistan and the Donors meetings. After a rough start, though, we believe they are settling down and we are making progress in developing a concept for the meetings that will be positive and successful in the end. The next big step will be Abu Dhabi, where we will have an opportunity to resolve outstanding issues and set the stage for Tokyo. One other outstanding issue will be ensuring that the donors come forward with serious pledges to support Pakistan,s needs at this moment of great need. In this regard, as noted by the Norwegian Ambassador, we are not confident that donors will be responding to the request. Washington may want to consider a further demarche to key donors reaffirming the importance the USG attaches to a successful outcome of the April 17 conference. PATTERSON