WHY there is a delay in getting much talked about comprehensive economic and financial package from the US-led coalition in return to the controversial support that Pakistan offered for combating terrorism?

Foreign dignitaries who came to Islamabad following September 11 events, promised economic support to Pakistan and a separate assistance for over three million Afghan refugees. They said that Pakistan needed to be fully supported because it had offered all necessary political and military support to the US-led coalition. Also, they had recognised that Pakistan’s economy had greatly suffered, specially in the shape of reduced trade (exports and imports) and foreign investment.

Senior government officials maintain that $1.2 billion assistance has been announced by the United States and in this regard they feel happy to say that $600 million has come in the kitty for budgetary support. But some of them do admit that it could take some time to have bigger support from the US, European Union and Japan on account of increased market access, reduction in tariffs and quotas and preferential treatment, especially by the United States.

US Ambassador to Pakistan Windy Chamberlen is all praise for the government and President General Pervez Musharraf for having supported the US coalition and sharing intelligence other necessary information to hunt down Osama Ben Laden, Mullah Omar and other important figures of Al-Qaeda network allegedly involved in terrorism.

However, what was largely expected was not offered to Pakistan so far for reasons best known to higher authorities. In the beginning everybody was given to understand that there was going to be a debt write off and in this behalf Japan’s $5 billion and America’s $3 billion bilateral loans were mentioned frequently. The first disappointment over the issue came when Finance Minister Shaukat Aziz visited Japan last month and was told that there was no constitutional and legal provision under which Pakistan’s loans could be set aside.

But reports have come now that Japan might consider the option. So was the response from the USA. Later, it was said that there was going to be a major debt relief which was still being awaited. The country’s editors were told by the president few days ago that the government might get considerable reduction in interest rate on US debts and that these debts were likely to be stretched over a period of 40 years with grace period of about 16 years. When will it materialise is anybody’s guess as no time frame has either been indicated by the US government or the president.

Experts say that Pakistan could have got a better deal and but no real effort was made in this behalf. On loan write-offs, generally Egypt is mentioned which got its roughly $6 billion loans written off by the United States. According to an Egyptian diplomat, all bilateral loans were written off by the United States when his country decided to support the then military coalition against Iraq during gulf war. He also said that there were no military debts which were written off. He said military hardware was received by Egypt from the US almost as grant.

The US government has disbursed $600 million which are a grant. The US Exim Bank announced that it has allocated $300 million for extending insurance cover to the US investors. This cover has been restored by the US Overseas Private Insurance Corporation (OPIC). The OPIC had withdrawn this cover when Pakistan had decided to go nuclear in May 1998. The officials of the ministry of finance were happy over the US Exim Bank’s new decision and were hoping that the much sought after US investment would now start for Pakistan. But nobody is making any comment on a new situation about this US Bank’s $300 million insurance cover. There are reports that the US investors are seeking “blanket exemptions” from all taxes for investment in Pakistan. The draft in this behalf has reportedly been sent to the government by the OPIC. “This is a serious matter and we will reply to this draft after having consulted at the higher level”, said a concerned official.

Pakistan might have gained or would still be gaining some thing from the US and its allies to overcome its pressing short term problems but in the long run there is nothing plausible one could see unless Islamabad is offered real market access by giving it a status like that of Bangladesh. The European Union (EU) has offered some market access but two of its members - Portugal and Greece - were opposing this new favour to Pakistan.

Pakistan has incurred big losses in revenue collection as a result of September 11 events and their aftermath. The CBR has scaled down has scaled down its revenue target from Rs457.7 billion to Rs430 billion—a reduction of Rs24 billion. The situation becomes alarming if it is seen in the light of chairman CBR Riaz Malik’s statement that a revenue target could further be slashed if the current situation continues to persist. The situation remains unchanged as exports and imports continue to decline. In October, imports reduced by 30 per cent which caused big revenue shortfall.

Under these circumstances, there are reports that the government has decided to increase the fiscal deficit target from 4.9 per cent to 5.3 per cent. The delay in the restructuring of the CBR is causing serious problems with the IMF, according to World Bank Vice President for South Asian Region Ms. Meiko Nishimizu the CBR will have to be reformed urgently. “I can not imagine Pakistan having a bright future without reforms in the CBR”, she said. She also said recently in Islamabad that Pakistan was a risky place for investment and that unless the element of harassment against businessmen is over, nobody would like to come to Pakistan for investment purposes. She also surprised many by saying that $300 million loan to be disbursed during the current financial year would not be offered if various reforms were not implemented. The World Bank was being expected to offer additional assistance but the bank is considering not to offer any thing on account of what has already been committed what to talk of getting any new assistance.