Reinstatement of Pak’s IMF Enhanced Structural Adjustment Facility/Electronic Frontier Foundation (ESAF/EFF)
As we’ve already talked about, the nuclear tests were a big setback for US-Pakistani ties, which had improved during the second Clinton administration when the US showed more interest in the country. Within a few days, President Clinton signed the Glenn Amendment, which put more economic and military bans on Pakistan. But since most of the help had already stopped, the Glenn penalties didn’t have many more effects on bilateral aid to Pakistan. An official US report says, “The Indian and Pakistani nuclear tests of May 1998 triggered the draconian-looking Glenn Amendment sanctions, but in practise, they were implemented with a lot of flexibility, which made them much less harsh than they could have been.” Also, as we talked about in Part III, the Brownback Amendments I and II, which were passed almost right after the Glenn Amendment sanctions were put in place against India and Pakistan, let the president get out of most of the Glenn sanctions. In November 1998 and October 1999, President Clinton used this power to get rid of some of the toughest sanctions against India and Pakistan.
Also, as we talked about in Part III, the Brownback Amendments I and II, which were passed almost right after the Glenn Amendment sanctions were put in place against India and Pakistan, let the president get out of most of the Glenn sanctions. In November 1998 and October 1999, President Clinton used this power to get rid of some of the toughest sanctions against India and Pakistan. But there is more to the business than just wheat and clothes. At that time, Pakistan had just over a billion dollars in foreign exchange savings, which wasn’t even enough to pay for imports for two weeks. Also, Pakistan would soon have to pay back a lot of money to other countries. Analysts said that Pakistan would have to do very bad things to get through the sanctions. To deal with the problem, the government, among other things, passed a new law that froze all Foreign Currency accounts in Pakistani banks and stopped all legal rights that dealt with foreign exchange. This, in turn, caused the Pakistani Rupee to lose a lot of value, which made Pakistan’s debt load bigger. Pakistan, but not India, borrowed money from the IMF. In May 1998, there was still almost a billion dollars in a line of credit that had been set up a few months before. The penalties put a big question mark over how this amount would be paid out. Under US law, the Administration had to fight against foreign organisations giving more money to Pakistan. Even though the US does not have a veto on IMF lending programmes, it is the largest shareholder in the body and has 18% of the votes. As with the World Bank, it was unlikely that the IMF would give money to Pakistan without help from the US.
Pakistan, like India, was a big borrower from the World Bank. However, $800 million in new loans to India have been put off forever. Pakistan’s request for a loan of about $750 million could not be handled in a different way, of course. Japan, which gave Pakistan the most bilateral aid, with loans worth nearly $500 million each year, stopped its aid plan.
After that, G-7 put in place economic penalties that made the situation even worse. The partial lifting of sanctions and the following reinstatement of Pakistan’s IMF Enhanced Structural Adjustment Facility/Electronic Frontier Foundation (ESAF/EFF) in early 1999, followed by a re-scheduling by the Paris Club and the London Club, kept the country from going into international default by just a little bit. The conditions of the IMF programme were hard for the government to meet, so the programme was stopped in July 1999. Pakistan revealed a reform plan and started talking with the IMF about a Poverty Reduction and Growth Facility that would start in July 2000.
China gives Pakistan M-11 missiles
Again, Pakistan was hit harder by the sanctions than India. This was mostly because Pakistan was more dependent on the US than India was, and it also bought many parts of its nuclear weapon and missile infrastructure, which led to sanctions meant to stop such transfers. India did not break these parts of US law because its missile and nuclear programmes were seen as mostly homegrown, even though they had received help from other countries. Brownback-II (June 1999) did give Pakistan some relief from the Symington and Pressler amendment penalties, which since 1990 had made it illegal for the U.S. to give Pakistan any military or economic help. But as bad luck would have it, this comfort didn’t last long. Section 508 of the Foreign Appropriations Act added a new layer of sanctions after the civilian government in Islamabad was overthrown in October 1999. These sanctions included limits on foreign military funds and economic aid. This meant that the US could mostly only help Pakistan with helping refugees and fighting drugs. In November 2000, after the US found that China had given Pakistan M-11 missiles in the latter half of the 1990s, the Clinton Administration put sanctions on the Pakistani Ministry of Defence, the Pakistani Space and Upper Atmosphere Research Commission, and their sub-units under the Arms Export Control Act and the Export Administration Act. This meant that exports to (and imports from) entities receiving Missile Technology Control Regime Category-I missiles were banned. Before the US gave in, Pakistan had to wait until the turn of the century. Reps. Ed Royce (R-CA) and Jim McDermott (D-WA) proposed a bill in April 2001 to get rid of all sanctions against India and Pakistan. But after 9/11 and its effects, the congressional process was put on hold.