First that the US and the Japanese pledges made at the forum were not regarded as additional to commitments made earlier. Be that as it may, what was clearly of serious concern to Tarin was the fact that the United States owes Pakistan a total of 2 billion dollars accumulated till end December 2009 under the Coalition Support Fund (CSF).
This unfortunately implies that the country which is leading the global efforts on the war on terror and which has been in the forefront of putting pressure on Islamabad, both during the tenure of the current government as well as its predecessor, to do more has failed to provide the economic wherewithal for Pakistan to actually do more. In the aftermath of the Khost attack, which wiped out the CIA headquarters from Afghanistan in one fell swoop, the definition of 'do more' has expanded. This is attributed to irrefutable evidence that the Khost attack was planned if not executed under the auspices of the Baitullah Mehsud network, currently being led by Hakimullah Mehsud.
The 'do more' to the Pakistan military has therefore been enhanced to include South Waziristan. Islamabad rightly fears that an attack on South Waziristan would open yet another front for the army, a front that it is not inclined to open at this stage as it sees little threat to Pakistan in their continued operations. Additionally, of course, the accumulating CSF due to Pakistan is compromising the country's ability to continue the war on terror, leave alone extend its ongoing operations. It is sincerely hoped that US administration not only reconciles its failure to meet its financial obligations in the war on terror to Pakistan but also revisits its policy of revenge for Khost that may further aggravate the conflict by providing the Taliban with a recruitment tool in the wake of increased drone attacks in South Waziristan.
Second, the Finance Minister stated that unless the promised assistance is forthcoming, budgetary expenditures are unlikely to be met. His critics would no doubt argue that the current year's budget was unrealistic in three basic ways. First, the unprecedented rise of 54 percent in the budgetary allocation for Public Sector Development Programme for a country that was under an International Monetary Fund (IMF) programme requiring strict adherence to an agreed budget deficit was unrealistic. Tarin may well point to political compulsions as a justification. Second, the budget also included 510 billion rupees as revenue from external sources under the Tokyo pledges, money that, according to the latest Letter of Intent submitted by the government to the IMF has not yet been disbursed. And, finally, failure to meet budgetary revenue targets, which included raising the tax-to-GDP ratio. This failure is certainly not unique to this government, it indicates that revenue targets were unrealistic nevertheless.
With foreign assistance not sufficient to meet the country's budgetary allocations, the government will not only rely on slashing development expenditure but also in exploring avenues of domestic borrowing. It must be noted that the National Savings Centres (NSCs) have emerged as a major borrowing source for the government, with the avenue of borrowing from the State Bank of Pakistan closed as per its commitment to the IMF, as part of the stand-by arrangement that would release over 11 billion dollars into the Pakistan economy for macroeconomic stabilisation over a period of less than two years.
Thus the venue of the Minister's statement reflects the importance attached by the present government on borrowing domestically from sources where its inflationary impact is minimal, hand in hand with its heavy reliance on foreign borrowing. There is little doubt that the government is between the devil and the deep blue sea. It cannot totally alienate the United States as that is likely to have repercussions on not only its ongoing assistance to Pakistan, but also on the release of the next tranche of the IMF stand-by arrangement. Similarly, the government cannot shift its entire borrowing requirements to domestic sources as that is unlikely to be adequate. The foregoing implies the need for the government to speedily enforce the austerity plan, which would cut unnecessary government expenditure as well slash all unnecessary imports with a view to lessening the pressure on the balance of payment position.