US to release $375 million under old arrangement

No deal on new CSF structure; Pak seeks expansion in definition of ‘War on Terror’

ISLAMABAD:

Amid gridlock over a fresh agreement on the continuation of Coalition Support Fund (CSF) disbursements beyond 2014, the United States has agreed to release $375 million under the previous CSF arrangement, which expired last year.

Pakistan took up the issue of disbursements of outstanding CSF dues and the need for a fresh agreement during meetings with the US State Department and Treasury officials held last week, said Finance Minister Ishaq Dar after his return from Washington.

While addressing a press conference on Wednesday, Dar said that the US authorities had agreed to release one of two outstanding tranches under the old CSF arrangement. The money will be disbursed in three to four days, he added.

Dar had met with US Deputy Treasury Secretary, Sarah Bloom Raskin and Under Secretary of State Catherine Novelli in Washington to discuss issues related to Operation Zarb-e-Azab and rehabilitation of Temporarily Displaced Persons.

Dar said that the Obama Administration has earmarked $900 million to $1 billion for CSF disbursements in the new US fiscal year, which would begin from October 1. Another Finance Ministry official said that the Obama Administration would release $375 million on account of outstanding dues from the September 2014 quarter.

“The CSF’s old arrangement expired in December 2014 and no new arrangement has been agreed upon yet,” said Dar while seeking US financial assistance to fight the ongoing war against militancy. As against 65,000 troops deployed before launch of operation, Pakistan has increased the strength to 190,000 troops, which has a huge cost, said Dar.



Dar said he explained to the US authorities that Pakistan was not begging for aid instead it was the responsibility of the US to share the financial burden, which he put at $1.9 billion.

According to people privy to the negotiations, Pakistan is seeking revision in the scope of definition of the war on terror and wants to include Operation Zarb-e-Azab in it. Both countries are also discussing the compensation mode and the rate of compensation, they added.

IMF Programme

While announcing the dates for the ninth review of Pakistan’s economy under $6.2 billion International Monetary Fund (IMF) programme, Dar appeared dual-minded on the need of having another fund programme.

Dar distanced himself from the statement given by Finance Secretary Waqar Masood who had told Reuters that Pakistan may consider seeking another IMF programme after expiry of the existing package, which is ending in September next year. “The solidification of foreign currency reserves position at the time of expiry of the current IMF programme would be a key factor,” said Dar. He hoped that there would be no need for a new programme.

Dar said that meetings for the July-September review of Pakistan’s economy would take place from last week of October till the first week of November, which would pave the way for the release of the 10th loan tranche of $500 million.

Eurobond

Dar defended the decision of raising $500 million through Eurobond at 8.25%, saying that the China fiasco pushed up the interest rate on the Pakistan bond by at least two percent. Dar said he decided to raise $500 million to return the same amount that Pakistan raised in 2006 and is maturing by March next year. “The syndicate (of financial advisors) had proposed to cancel the transaction but I do not regret my decision to raise the money,” said Dar.

He said the transaction was also important to remain at the radar of international investors besides testing the strength of Pakistan’s economy.

Dar said that 80 leading global investors bought Pakistan’s bond. Out of $500 million, American investors lent 38%, British investors 36%, and 12% each by Middle Eastern and European investment funds, he added.

Published in The Express Tribune, October 1^st, 2015.