U.S. recently said that it would be suspending most of its security assistance to Pakistan until it “takes decisive action” against terror groups.
What is the significance?
The total amount in question could exceed $1 billion dollars.
The decision will delay, and perhaps eventually deny, pending payments to Islamabad.
This includes both payments under the State Department’s Foreign Military Financing and under the Coalition Support Fund, which involves reimbursement for Pakistan’s logistical support in the Afghanistan war.
However, civilian assistance programmes are not included.
$255 million of foreign military financing (FMF) has already been withheld for a few months.
Can this be a true leverage?
Some believe that it can only be a minimal coercive leverage
This is because
The US continues to rely on Pakistan for the ground and air supply routes to Afghanistan, and
Any financial harm that the US inflicts on Pakistan will be cushioned by CPEC.
But it is to be noted that the security aid is not the only leverage the US has.
US also has is its influential role in international financial institutions like the International Monetary Fund (IMF) and the World Bank.
The Pakistani army is prone to seeking bailout packages from the IMF.
Widening trade deficit, high public debt and low foreign exchange reserves may also push Pakistani government in this year towards these institutions.
The US also has tools like visa denial and freezing of assets of senior officers in the Pakistan army and the Inter-Services Intelligence (ISI) involved with terrorist outfits.
In the past, the fear of sanctions by the inter-governmental Financial Action Task Force (FATF) has forced Pakistan to ban fund-raising by organizations proscribed by the UN.
A concerted set of moves under a tighter, overarching sanctions regime might asphyxiate Pakistan’s illicit activities.
As far as CPEC is concerned, it is yet to be seen whether it will kick-start the virtuous cycle of high investment and greater productivity or push Pakistan into a debt trap.
