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Sanctions likely to hit Pakistan hard

The economic consequences of Pakistan's nuclear tests could be severe.

There is not much US aid to cut, since Pakistan in any event has been under that country's sanctions since 1990. However, the mandatory sanctions as per the Glenn Amendment, which the Clinton administration has to enforce, will right up front put a $1.6 billion loan from the International Monetary Fund in jeopardy.

Loss of international funding is expected to hit Pakistan harder than India, given that the weaker Pakistan economy is more reliant on foreign aid.

White House spokesman Mike McCurry, however, suggested that the Clinton administration might not be as harsh on Pakistan as it has been on India. "We will have to assess that (i) in the coming days, to see if there are different ways in which we could clearly express displeasure with what we think is a wrong decision but also clearly acknowledge that there is some difference between the respective decisions of India and Pakistan to test nuclear devices," he said.

He said there was limited appettite in the international community for the kind of sanctions US law requires. "But there very clearly is sentiment to take steps that express the accumulated displeasure," he added, "over the testing in both Asian nations."

McCurry said the US would oppose the next $ 292 million instalment of the IMF loan to Pakistan, expected to have been approved later this year.

The 182-nation IMF's executive board was expected to decide by the end of June whether or not to proceed with the next instalment of the outstanding loan, following the return of an IMF fact-finding team to Pakistan last weekend. As the largest IMF shareholder, the US can effectively block any loan.

Further, the US will also seek to block the $ 1.8 billion the Asian Development Bank is expected to provide Pakistan between 1998 and 2000. Not to mention disbursements by the World Bank amounting to between $ 500 million to $ 700 million a year.

"Those are all disbursements we don't control," McCurry said, "but which it will now be our position to oppose, by enlisting support from countries like Canada and Japan."

Also in jeopardy, according to McCurry, is $ 293 million in US export-import credits to finance exports to Pakistan, as also a further $ 60 million in commercial arms exports.

Also out of the bounds of the possible is any chance of Pakistan acquiring the 71 F-16 fighter-bombers it had ordered and paid for in 1990.

The Bush Administration suspended the $ 650 million sale in 1990 because of suspicions that Pakistan was developing an atom bomb. There had been suggestions recently that the Clinton administration might release some of the planes, to allay the Islamabad government's security concerns after India tested nuclear devices earlier this month. This, however, has now all but been officially shelved.

In the 1980s, Pakistan received up to $ 600 million a year in American military and economic assistance, making it the third-largest recipient of such aid after Israel and Egypt.

US aid to Pakistan now totals $ 15 million for food assistance, plus $ 9 million over three years for humanitarian organisations in the country.

Another immediate danger is that if Pakistan loses the IMF's stamp of approval, foreign lenders might call in their loans to the Asian nation, and as a result its currency will come under pressure.

Thus, if sanctions are imposed, the Pakistan government according to experts would have to take a series of immediate, painful measures like imposing exchange rate controls, import controls and the freezing of foreign-currency deposits.

Japan, Pakistan's largest aid donor, meanwhile said on Friday that it will halt all new economic aid and yen-denominated loans to protest that country's decision to detonate five nuclear test weapons.

"The nuclear tests do not just involve Pakistan but fly directly in the face of the nuclear Non-Proliferation Treaty, deepen the crisis and clearly threaten stability in the region," Prime Minister Ryutaro Hashimoto said after announcing the suspension.

The sanctions for Thursday's tests in western Pakistan are the same as those that Japan slapped on India after it tested nuclear weapons earlier this month.

Pakistan's nuclear tests have raised louder cries of alarm from the Japanese media than India's tests. News reports warned of the spread of nuclear weapons to nearby North Korea and the threat posed by the two fledgling atomic powers to Japan's sea links with the oil-rich West Asia.

The ministry of foreign affairs also said Japan will re-examine its contributions to international financial institutions earmarked for Pakistan. According to latest figures available, Japan was Pakistan's biggest donor last year, providing 32 billion Yen ($ 230 million) in loans and 5.7 billion yen ($ 40 million) in aid grants.

The mayors of Hiroshima and Nagasaki, the sites of the world' only two atomic bombings in August 1945, sent letters to Pakistan's Tokyo embassy, protesting the tests.

UNI