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US proposes converting military financing for Pakistan into loans

By Anwar Iqbal 2017-05-24
WASHINGTON: The Trump administration on Tuesday proposed converting the US foreign military financing (FMF) for Pakistan into a loan guarantee but has left it to the State Department to make a final decision.

Also on Tuesday, the State Department issued a new travel advisory for Pakistan, second in 45 days, urging citizens to postpone travels to Pakistan because of `increased terrorist violence`.

The Trump administration sent its maiden annual budget to the US Congress on Tuesday afternoon, proposing to cut federal spending by more than $3.6 trillion over the next decade.

This will impact both economic and military assistance that the United States provides to its allies, particularly those fighting terrorism.

After the Monday afternoon briefing at the White House, media reports claimed that both economic and military assistance to Pakistan had been converted into loans and that the Trump administration had stopped all grants given to that country.But later, the White House Office of Management of Budget issued a statement, clarifying the reports attributed to its director, Mick Mulvaney.

`Director Mulvaney stated that the FMF funding for Pakistan would be provided in the form of a loan guarantee. This is one of the options that the administration had explored in its internal deliberations, but the request itself does not make that determination,` the White House budget office said.

`Whether the funding is provided through grants, or as a subsidy for a guaranteed loan, is an option the State Department can exercise to ensure our foreign assistance best supports our national interests,` it added.

The FMF enables eligible partner nations to purchase US defence articles, services, and training through either foreign military sales or through direct commercial contracts. The secretary of state determines which country qualifies for this programme.

In 2016, the United States provided $255 million of the FMF to Pakistan, bulk of which was for enhancing the country`s counterterrorism capabilities. Pakistan also received $25m fromthe International Military Education and Training (IME T) fund.

A loan guarantee assures a lender that the country borrowing the money can return it.

In 2014, Pakistan received a similar guarantee of $125m from the International Finance Corporation for a $500m from the market for building the Dasu dam.

Asked at the White House briefing on Monday afternoon if the proposed change would affect US assistance to countries like Vietnam, Indonesia, Colombia, Pakistan, Philippines, and Ukraine, Director Mulvaney said: `Yes, I can confirm that`.

The media interpreted this as indicating that the proposed change would affect both economic and military assistance to these countries. But Mr Mulvaney later explained that this change would only affect US military assistance to these nations.

`Yes, we do change a couple of the foreign military programmes from direct grants to loans. Our argument was, instead of giving somebody $100m, we can give them a smaller number worth of loan guarantees and they can actually buy more stuff.