The USA has been the largest investor in Pakistan. It is also the largest market for Pakistani exports. Thousands of Pakistanis are studying in US universities and living and working in America. Trade relations between the two countries continue to grow
Pakistan, having the fifth largest population in the world, sits amongst Asian giants, in human resource terms, in economic terms and in terms of energy, water and other natural resources. It is also important in military and nuclear technology terms. Pakistan borders Iran, Afghanistan, China (beyond which lie Central Asian Republics and Russia). Saudi Arabia and other Gulf states lie across the Persian Gulf and the Arabian Sea. Therefore, Pakistan has an important strategic significance in the region both for its neighbours and for the United States of America that has geo-strategic interest in the region and was recently fighting a war in Afghanistan. The US and allied NATO forces will quit Afghanistan by September 11.
Formal relations between the USA and Pakistan were established on October 20, 1947. According to American sources between 1948 and 2016, “the United States provided nearly $78.3 billion to Pakistan in grants in forms of military aid (which amounts to 96 percent of collective US aid)”. From 1979 to 1989, the USA and Pakistan actively cooperated in funding the Afghan mujahideen in their fight against the Soviet occupation of Afghanistan.
The relations between the USA and Pakistan became ‘cold’ after America applied nuclear proliferation sanctions on Islamabad. The relations were rehabilitated when Pakistan helped USA in its war in Somalia and Bosnia. The relationship between the two countries again nosedived in 1998 when USA again applied sanctions following nuclear tests by Pakistan. These sanctions were lifted in 2001 when American forces entered Afghanistan and Pakistan helped the USA in its war against terror. Pakistan lost thousands of its soldiers and civilians in fighting the war. Pakistan won the war in the long run at a cost of millions of dollars in financial losses and thousands of lives. USA suspended security assistance to Pakistan in 2018.
According to researchers, “Pakistan has an important place in American geopolitical strategy and is a major non-NATO ally in the region since 2002. United States is the second-largest supplier of military equipment to Pakistan after China. It is one of Pakistan’s largest economic partners in terms of foreign direct investment.” State Department sources state that, “USA works closely with Pakistan on a wide array of issues ranging from Afghanistan stabilisation efforts to counterterrorism to energy, trade and investment”. USA has been the largest investor in Pakistan and is the largest market for Pakistani exports. Thousands of Pakistanis are studying in US universities and living and working in America. Trade relations between the two countries continue to grow. “Major US investments are concentrated in consumer goods, chemicals, energy, agriculture, business process out-sourcing, transportation, and communications.”
The current US administration has inducted at least four people of Pakistani origin and background in senior positions.
In military terms, Pakistan comes under the US Central Command (US CENTCOM) theatre of operations. There are no US bases in Pakistan now and the prime minister has categorically stated that Pakistan will not provide its territory for such bases in the future.
In an interview with Chinese media in June 2021, he stated that, “Pakistan will not change or downgrade its brotherly relations with China no matter what pressure is put on it” by the US and its allies in the region. In the past Pakistan has actively facilitated the US in its war against the USSR and in Afghanistan with air bases. From July 17, 1959 until January 7, 1970, the US was using Badaber Air Base near Peshawar to launch its famous U-2 spy planes over Soviet Union. Also, airbases in Pakistan were used by the Americans for logistic support, helping in flood relief and earthquake relief operations in Pakistan and for US war against terriorists when drone attacks were used to strike terrorists and their hideouts. American presence in Pakistan in military terms ended in 2010.
Apart from investment, trade and military relations there are extensive people-to-people contacts and cultural relations between Americans and Pakistanis. The current US administration has inducted at least four people of Pakistani origin and background in senior positions.
The US has high stakes in and control of the International Monetary Fund. As far as Pakistan’s relations with the IMF are concerned, the country joined the Fund in 1950. Since then it has heavily depended on the IMF for loans. Pakistan has used the bailout facility or General Resource Account (GRA) also called stand-by arrangement (SRA) from IMF 13 times. The last was in 2019 by the current government.
The United States is the largest cumulative contributor to the IMF ($155 billion). The US is also the largest voting bloc of the IMF and has the power to veto many decisions. Relations with the US have an impact on dealings with the IMF. The agreement between the IMF and the PTI government in 2018 is an agreement reached on the measures required to complete further reviews of the reform programme of Pakistan, which should eventually bring Pakistan $6 billion from the IMF’s Extended Fund Facility (EFF). The IMF has promised to extend its loan facility on conditions that Pakistan would revisit its fiscal policy and increase substantially its energy tariffs, remove its energy subsidies, increase its tax revenue, privatize its public entities and organisations, as well as make fiscal adjustments to the budget. Another condition is the autonomy of the State Bank (SBP) from government control. As yet, Pakistan has received $1.5 billion out of the agreed $6 billion. Pakistan has also received $1.4 billion from the IMF’s Rapid Financing Instrument in separate, emergency funding for Covid-19 support.
The writer is a professor of economics and a former chairman of the R&D Committee at University of Central Punjab. He can be reached at email@example.com