Economic uncertainty continues
Taking note of deterioration in Pakistan’s economic outlook and external position, Standard & Poor Global Ratings lowered Pakistan’s sovereign credit rating from “B” to “B-“. The agency cited diminished growth prospects as well as elevated external and fiscal stresses. However, it maintained the rating outlook at “stable” in the expectation that Pakistan would secure sufficient funding to meet its external financing requirements over the next twelve months. Separately, Moody’s Investors Service changed its outlook for Pakistan’s banking system from stable to negative in view of their high exposure to the country’s low rated sovereign debt and slowing economy.
After a meeting between PM Imran Khan and the IMF Managing Director, Christine Lagarde in February in the UAE, it was reported in the media that the two sides had moved a step closer to an IMF bailout, but that Pakistan would be required to accept some tough conditions. The Prime Minister himself hinted at “deep structural reform”, without elaborating the measures that it would entail. However, there was no final word on a bailout agreement till the end of March.
In a sign of China’s increasing willingness to provide bridging finance to Pakistan, it disbursed the proceeds of a government loan of $2.2 billion at the end of March. Media reports quoted a Pakistani finance ministry adviser as saying that the loan would “further strengthen foreign exchange reserves and ensure balance of payments stability.” China had earlier provided $2 billion in July 2018.
FATF not satisfied with steps taken by Pakistan
Pakistan’s case continued to be under the scrutiny of the Financial Action Task Force that had placed it on its grey list in June 2018. In a statement issued in February, FATF condemned the Pulwama terror attack and stated: “Pakistan has revised its TF (terror financing) risk assessment. However, it does not demonstrate a proper understanding on the TF risks posed by Da’esh (ISIS), Al-Qaida, JuD (Jamat-ud-Dawa), FIF (Falah-e-Insaniyat Foundation), LeT (Lashkar-e-Taiba), JeM (Jaish-e-Mohammed), HQN (Haqqani network) and persons affiliated with the Taliban.” Pak media reports suggest that a delegation of the Asia-Pacific Group(APG) on money laundering, a regional affiliate of the FATF that visited Pakistan in March, too expressed its dissatisfaction with the action taken by Pakistan on its agreed plan with FATF. An official was quoted as saying that while the APG acknowledged the action taken by the federal government by way of enacting legislation, regulations and data collection system, they were unhappy with the lack of action at the provincial and district level where the proscribed organizations operate. Earlier in March, Pakistan had urged the FATF President to replace India as co-chair of the Asia-Pacific Joint Group with any other member country.
Military Courts cease to function
The Pakistan government and the opposition failed to reach an agreement on extension of tenure of the military courts that were set up in 2015, to try civilians accused of acts of terror, after a terror attack on the Army Public School in Peshawar in which a large number of children were killed. Set up initially for a period of two years, the tenure of the courts was extended in 2017 by another two years. The PTI government, which does not have the requisite numbers in the Parliament to grant yet another extension, was in talks with the opposition to get their support. Since it failed to do so, the courts ceased to have a legal cover at the end of March and, as per Pak media reports, will cease to function.
Pakistan India relations worsen
The Indo-Pak relationship that has been in free fall over the last few years reached a crisis point when in one of the worst terror attacks on February 14, at least 40 CRPF personnel were killed and many injured in the Pulwama district of J&K after a vehicle laden with explosives rammed into a convoy that was carrying troops from Jammu to Srinagar. Pakistan based Jaish-e-Mohammed (JEM) claimed responsibility for the attack and released the picture of Adil Ahmad Dar, a resident of the Pulwama district as the suicide bomber. Dar was reported to have joined JeM in 2018. A special issue of the Af-Pak digest on ‘Pulwama Terror attack and its aftermath’ was issued in March. However, a summary is given in the following paragraphs.
The Cabinet Committee on Security met on February 15 and decided that India would take all diplomatic steps to isolate Pakistan in the international community. It also decided to withdraw MFN status accorded by India to Pakistan unilaterally in 1996. Subsequently, tariff was raised on imports from Pakistan by 200%. A large number of countries issued statements condemning the Pulwama attack, with some of them calling upon Pakistan to take action against the terror groups operating from its territory. On February 21, UNSC condemned the Pulwama attack in the strongest terms and reaffirmed the need to hold perpetrators, organizers, financers and sponsors of such attacks accountable and bring them to justice and urged all states, in accordance with their obligations under international law and relevant Security Council resolutions “to cooperate actively with the Government of India and all other relevant authorities in this regard.”
The Indian Air Force struck the biggest training camp of JeM at Balakot in the Khyber-Pakhtunkhwa province of Pakistan in the early hours of February 26 and India described it as a “non-military pre-emptive action” in view of credible intelligence that JeM was attempting another suicide attack in India. The National Security Committee of Pakistan met the same day and rejected “Indian claim of targeting an alleged terrorist camp near Balakot and the claim of heavy casualties.” Pakistan used its air force to target military installations on the Indian side on February 27 and the attempt was thwarted by the Indian Air Force. In the aerial engagement that followed, a MiG 21 Bison of the Indian Air Force was shot down by the Pakistanis and its pilot captured by them. As a result of the pressure mounted by India through the international community, the pilot, Wing Commander Abhinandan Varthaman, was repatriated to India by the Pakistanis on March 1. With influential countries calling for restraint on both sides, the situation moved towards de-escalation subsequently.
India’s diplomatic effort was able to secure widespread condemnation of the Pulwama terror attack and ensured that, barring the Chinese call to respect the sovereignty and territorial integrity of all countries and a proforma condemnation of the Balakot strike by the OIC Contact Group, Pakistan received no support from any country against the Indian action and the Indian pilot was repatriated quickly.
The value of the Balakot strike, described as pre-emptive action, lies in it being an expression of intent by India to use air power to hit terror targets on the Pakistani territory, when necessary. Therefore, notwithstanding the extent of damage, it will result in some disruption of Pakistan’s terror machine by causing uncertainty in the minds of Pakistan’s terror planners and force them to adapt by, inter alia, relocating the terror facilities deeper inside Pakistan. However, it is unlikely to put an end to Pakistan sponsored terror against us. The Government was wise in not escalating after Pakistan’s retaliation because both the trajectory and outcome of such escalation would have been completely uncertain. Moreover, the influential countries that had stood by us after the Pulwama attack, counselled restraint on both sides after Pakistan retaliated, signalling that the international community has little appetite for a military escalation between two nuclear armed countries. The de-escalation that followed bears the imprint of behind the scenes diplomacy by third countries.
The action taken by Pakistan under international pressure, following the Balakot strike, against terror group was in the nature of reversible steps taken in the past under similar circumstances that did not result in any meaningful change from our point of view. China once again blocked a move by the US, UK and France at the 1267 Sanctions Committee of the UNSC to list the JeM chief, Masood Azhar as a global terrorist. On March 27, Pakistan conveyed to India that all information provided by it in the dossier on the Pulwama attack handed over to them in February was checked and no Pakistani link with the attack could be established. It expressed its readiness to investigate and take action if there was any fresh evidence. India expressed disappointment at Pakistan’s response to its detailed dossier on JeM’s complicity in the cross border terror attack at Pulwama and the presence of JeM’s terror camps and leadership in Pakistan, but said that the response paper handed over by Pakistan to the Indian High Commissioner in Islamabad was being examined. In view of the above attitude of Pakistan, we will have to persist with our efforts along with our international partners to keep up pressure on Pakistan to take meaningful action against the terror groups operating from its territory.
In spite of the tension resulting from the Pulwama attack, a meeting of Indo-Pak officials took place on March 14 to discuss the modalities of the Kartarpur corridor. Differences were reported to persist between the two sides on the number of pilgrims to be allowed to visit the shrine per day and some other issues. A follow up meeting had been scheduled for April 2. However, at the end of March, India sought clarifications from Pakistan on some issues including association of anti-India Khalistani elements with the project on the Pakistani side and said that it would wait for a response before deciding a new date for the follow up meeting. A Pakistan Foreign Office spokesman regretted India’s decision to postpone the meeting.
Pakistan lodged a strong protest with India at the acquittal by an Indian court of all the four accused in the 2007 Samjhauta blast case in which over 40 Pakistanis had been killed. The spokesman of the Indian Ministry of External Affairs rejected Pakistan’s attempt to politicise the matter and “to deflect attention from their failure in bringing perpetrators of several terrorist attacks in India and the region to justice.” He added that there was a complete lack of understanding on the Pakistani side about how India’s independent judiciary functions.
After successful conduct of the test of an anti-satellite missile by India, the spokesman of the Pakistan Foreign Ministry said that there was need to address gaps in the international space laws to ensure no one threatens peaceful activities and applications of space technologies for socio-economic development. He expressed the hope that the countries that had in the past condemned demonstration of similar capabilities by others would work towards developing international instruments to prevent military threats relating to outer space.
The Kulbhushan Jadhav case came up before the International Court of Justice in February. India stated that Jadhav’s trial by a Pakistani army court failed to satisfy “even the minimum standards of due process” and sought the annulment of the death sentence awarded to him and his release from Pakistani custody. After hearing arguments of both sides, the ICJ reserved its verdict to be delivered on a future date.
According to an agreement between China and Pakistan, the Chinese would build water filtering plants, green and clean health care projects and a central labour support system on the CPEC transit route from Gilgit to Manshera in the first phase and from Manshera to Islamabad during the second phase.
Pakistan’s Communications Minister, Murad Saeed alleged that there was corruption in the award of contract to build the Sukkur-Multan motorway under the CPEC banner. The contract had been awarded to the China State Construction Engineering Corporation (CSCEC), which was among the three Chinese companies bidding for the project. Construction work on the project had begun in August 2016. The Minister was apparently trying to discredit the PML(N) government under which the contract was awarded. However, CSCEC reacted strongly and said that it was “extremely shocked” at the “groundless allegations” of the Minister. The controversy was indicative of the various challenges that the CPEC continues to face.
As stated above, in mid-March, China blocked yet again a move by the US, UK and France in the 1267 sanctions committee of the UN Security Council to declare JeM chief, Masood Azhar a global terrorist. In a cryptic statement, a Chinese official told journalists in Beijing that China would support a “solution that is acceptable to all sides” and “is conducive” to resolving the issue. Later in the month, the US circulated a draft resolution to the UNSC to blacklist Masood Azhar. It was seen as a move to circumvent the Chinese stalling tactics at the sanctions committee of the UNSC. Reacting to the move, the spokesman of the Chinese Foreign Ministry said that it would “do nothing to facilitate a solution through consultation and will only lead to further complication of the issue.” He cautioned the US to “exercise prudence and refrain from forceful actions” to have the resolution passed and added that China needed more time to conduct a comprehensive and thorough assessment. In a subsequent statement criticizing the US move, the Chinese spokesman claimed that China had been in close communication with various parties and had made progress, hinting that the US action would negate the claimed progress.
The Saudi Crown Prince, Mohammed bin Salman, who paid a visit to Pakistan in February, was accorded a red carpet welcome, with Prime Minister Imran Khan receiving him along with his cabinet colleagues and COAS General Bajwa on his arrival. Imran Khan personally drove the Prince to the PM House. Pak media reports in the run up to the visit suggested that Pakistan was set to play a greater role in the Saudi-led alliance against terrorism. The reports were given credence by the fact that the former Pak COAS Raheel Sharif, who is commander-in-chief of the Saudi led Islamic Military Counter Terrorism Coalition was in Pakistan before the visit of the Crown Prince and held consultations with top civil and military leaders. In a joint statement, the two sides noted with satisfaction their strong defence and security ties and agreed to further enhance cooperation in this field. They expressed appreciation for the sacrifices made by the two sides in the war against terrorism. They underlined the need not to politicize the UN regime for listing of global terrorists. The Crown Prince praised the “openness and efforts of Prime Minister Imran Khan for dialogue with India and opening of the Kartarpur crossing point” and stressed that “dialogue is the only way to ensure peace and stability in the region to resolve outstanding issues.” The statement noted that various agreements and MOUs signed during the visit would cover total Saudi investment of $20 billion.
The Iranian Foreign Ministry summoned the Pakistani Ambassador in Tehran on February 17 and accused Islamabad of harbouring the jihadist group behind a suicide attack a few days earlier in Sistan-Baluchistan province of Iran that killed 27 members of the Iran Revolutionary Guards. Earlier, the Iran Revolutionary Guard commander had blamed the Pak army and ISI for sheltering terrorists. He warned that “The government of Pakistan must pay the price of harbouring these terrorist groups and this price will undoubtedly be very high.” In a subsequent telephonic conversation with his Iranian counterpart, the Pakistan Foreign Minister offered cooperation in investigation into the suicide bombing. Following yet another phone conversation in March between the Pakistan Foreign Secretary and the Iranian Deputy FM Araghchi, the latter tweeted: “Today I spoke with Tehmina Janjua, foreign secretary of Pakistan, over phone. Iran and Pakistan are close neighbours and friends. We agreed to strengthen our cooperation in all fields including fighting terrorism. Iran calls for de-escalation and peaceful resolution of Pakistan-India conflict.”
April 8, 2019