Pak ties in turmoil, US holds up payments

The United States has held up a reimbursement of USD 400 million (approx Rs 2,080 cr) spent by Pakistan on the war against terror due to the strained relationship between the two countries, adding to the worries of financial managers in Islamabad, a media report said on Monday.

The US Congress is yet to "notify" the reimbursement of USD 400 million from the Coalition Support Fund (CSF) and Pakistan is unlikely to receive the payment by June 30, when the current fiscal year will end.

The delay will contribute to a surge in the fiscal deficit by 0.2 per cent, taking it to 7.5 per cent of GDP for the current financial year.

For release of outstanding dues from the CSF, the US administration requires a notification from the Congress 15 days before the formal release of the amount.

The time for issuing the notification has been exhausted and it is unlikely that Pakistan will get the USD 400 million by June 30, The News daily quoted its sources as saying.

As a result, the budget deficit will cross 7.5 per cent of the GDP, including liabilities of Rs 391 billion on account of the power and commodities sector, the sources said.

The government's financing requirement will touch Rs 1,545 billion even if all tax and non-tax targets are met in accordance with revised projections.

Rana Asas Amin, the Special Advisor to the Finance Division, said the projected budget deficit of 5.5 per cent of the GDP (excluding Rs 391 billion on account of liabilities of the power and other sector) would be impacted by 0.2 per cent if the reimbursement is not received from the US.

"We are not going to delete this due amount from our books with the expectation of receiving this amount till the last moment.

"However, if it does not come, then the government plans to cut its expenditures by 0.1 per cent of GDP and the net impact will be curtailed by 0.1 per cent of GDP, so the budget deficit would hike up to 5.6 per cent of GDP against revised target of 5.5 per cent of GDP for outgoing fiscal year," Amin said.

On average, the US has reimbursed 60 to 65 per cent of Pakistan's claims from the CSF during the past 10 years.

Pakistan had budgeted USD 800 million in the current fiscal under the CSF, out of which a payment of USD 400 million is reportedly in the pipeline.

There is also a pending reconciled amount of USD 2.5 billion (approx Rs 13000 cr) but no funds have been released by the US since May 2011, when Osama bin Laden was killed in a unilateral American raid in the Pakistani garrison town of Abbottabad.

The US has so far paid Pakistan USD 8.654 billion from the CSF since 2001, when Islamabad became an ally in the war against terrorism.