Islamabad: Troubles seem to be mounting for Pakistan as the US has decided to cut its financial aid by over 75 per cent to $150 million from $1 billion. Amid Pakistan's poor economic conditions, the US decision could deeply hurt its shaking economy. Under the defence spending bill passed by the US Senate, the US could cut aid to Pakistan as the country is no longer required to take actions against terrorist groups inside the country. Pakistan's total public debt stands at $199 billion, of which $134 billion is domestic debt while the rest is external liabilities.
The National Defence Authorisation Act, 2019, states that Pakistan is not required to take any action against Haqqani Network or the Lashkar-e-Taiba (LeT). Pakistan will also not get any reimbursement for its counter-terrorist activities in the country. The bill was passed by 87 to 10 votes in the US Senate, following which it now awaits US President Donald Trump's approval.
"The legislation reduces the total amount of funds provided for reimbursement to Pakistan to $150 million. This is a significant reduction from the $700 million that was authorised through Coalition Support Fund (CSF) last year," Anish Goel, who was part of Barack Obama's White House National Security Council, said. The Pentagon no longer had any tools to put pressure on Pakistan to undertake counter-terrorism activities or action against the Haqqani Network, said Goel, who till recently was a senior staffer in the Senate Armed Services Committee.
The previous Obama administration used to disburse $1.2 billion per year to Pakistan under the Enhanced Partnership with Pakistan Act of 2009, also known as the Kerry-Lugar-Berman Act, but Trump has taken a tough stance against Pakistan's inability to handle terrorism activities on its soil. Before this, the US had cut $1.5 billion worth of aid to Pakistan in January over its closeness to China and its failure to act against terrorist groups like the Afghan Taliban and the Haqqani Network.
Saudi-backed bank to grant loan
The Saudi Arabia-backed Islamic Development Bank (IDB) is expected to grant Pakistan a loan of around $4 billion to repair the country’s acute balance of payments problem. This much-needed financial assistance will enhance Riyadh’s influence when Imran Khan takes over as prime minister. Pakistan has also returned the favour by supporting Saudi Arabia in its diplomatic fight with Canada over the release of women’s rights activist Samar Badawi. The Saudi loan would be in addition to a $12 billion bailout package being sought from the International Monetary Fund (IMF). Pakistan’s foreign exchange reserves have plummeted so much over the past year that Chinese loans have kept the country afloat.
The unintended consequence of the IDB’s loan would be to relieve the pain on Pakistan being currently inflicted by American actions. This is not the first time that Saudi Arabia has come to Pakistan’s rescue. In 2014, Riyadh had gifted Islamabad $1.5 billion to shore up its foreign currency reserves. The close ties between Saudi Arabia and Pakistan began during the tenure of Zulfiqar Ali Bhutto. According to a CIA report, Bhutto had 'obtained assurances of generous aid from Saudi Arabia' during a state visit in 1975. In exchange for such support, Pakistan 'furnished military technicians and advisers to the armed forces of Saudi Arabia.' Pakistan helped the Saudis free the Grand Mosque in Mecca in 1979 and stationed its military forces on their territory during the Iran-Iraq War. Most of the troops were recalled after the war ended in 1988, but a smaller contingent stayed on.
