The United States has delayed the release of 'war on terror' funds for Pakistan amid reports that Washington has threatened to cut off civil and military aid to Islamabad.
Pakistan was expecting $500 million in the last tranche of the Coalition Support Fund, which was set up by the US Congress following the 9/11 attacks to reimburse allies for costs in supporting the US-led war on militancy.
On April 25, Pakistan Finance minister Abdul Hafeez Shaikh had announced after a visit to the US that the Obama administration was "firmly committed" to releasing at least $500-600 million by June 30. However, a finance ministry official said that the US Congress is yet to clear the transaction, The Express Tribune reports.
This is the second major setback to Pakistan's besieged economic managers, who seem to be struggling to keep the budget deficit below six per cent of total Gross Domestic Product.
Earlier this week, government efforts to issue exchangeable bonds worth $500 million went in vain as international investors advised Islamabad to wait for a suitable time. Following these two events, the budget deficit can now increase by 0.4 per cent of the GDP.
Release of CSF money has been marred by mistrust, as US officials believe that Pakistan overstates the expenses it incurs. For the outgoing financial year, Islamabad had budgeted 133.5 billion rupees, but so far, it has only gotten 68 billion rupees.
For the next fiscal year, the government expects to get 118 billion rupees, of which 50 billion rupees have been allocated to the armed forces in line with an understanding between the army and the Finance Ministry that 60 per cent of CSF disbursements will go into civilian accounts and 40 per cent to the army.
Meanwhile, the US has threatened to cut off civil and military aid after Pakistan launched a crackdown against the "Central Investigation Agency network" and appears reluctant to go after one of the deadliest Afghan insurgent groups in North Waziristan Agency.
Military and foreign office officials, all speaking on condition of anonymity, said the main reason behind the friction is Pakistan's tough stance on the role of CIA operatives, its decision to reduce US footprint in the country and its refusal to launch a full-scale military offensive against the Haqqani network in North Waziristan.
"The Americans are sending out all kinds of threats in recent days they have even threatened to stop financial assistance," a military official said.
