U.S. Helped Pakistan Get IMF Bailout With Secret Arms Deal For Ukraine

(CTN News) – Two sources familiar with the agreement have confirmed that secret arms sales from Pakistan to the United States helped to secure a controversial bailout from the International Monetary Fund earlier this year.

Pakistan’s involvement in a conflict it was pressured by the U.S. to take sides on may be seen in the arms sales made to support the Ukrainian military.

This disclosure sheds light on the kind of covert dealings between financial and political elites that are rarely made public despite the fact that average citizens ultimately foot the bill.

Protests have been going on for quite some time now throughout the country because of the IMF’s insistence on severe structural policy adjustments as a condition of its recent bailout. In retaliation, Pakistan has experienced a spate of major attacks during the past few weeks.

There has been a political crisis in the country for almost a year and a half, and the current protests are just the latest chapter. With American support, the Pakistani military orchestrated a vote of no confidence in Prime Minister Imran Khan in April 2022.

State Department personnel had privately voiced their displeasure with Pakistan’s “aggressively neutral” attitude on the Ukraine crisis from Khan’s administration, leading up to his removal. They claimed “all would be forgiven” if Khan were deposed and foretold doom if he continued in power.

With Khan out of the way, Pakistan has become an important ally for the United States and its partners in the fight, and the United States has recently repaid the International Monetary Fund (IMF) for its loan.

The new administration in Pakistan was given enough time to implement a widespread crackdown on civil society and to imprison Khan thanks to the emergency loan that allowed them to delay elections indefinitely.

“Pakistani democracy may ultimately be a casualty of Ukraine’s counteroffensive,” Arif Rafiq, a nonresident researcher at the Middle East Institute and expert on Pakistan, told The Intercept.

Pakistan is a major manufacturer of standard weapons used in low-intensity conflicts. Open-source news sources on the battle have shown that the Ukrainian military is reportedly using shells and other ordinance manufactured in Pakistan despite neither the United States nor Pakistan acknowledging the arrangement.

A member of the Pakistani military revealed records describing the weaponry deals to The Intercept earlier this year. From the summer of 2022 until the spring of 2023, the records detail U.S. and Pakistani agreements regarding the sale of munitions.

An American brigadier general’s signature was verified against his public mortgage records in the United States; corresponding Pakistani and American documents were compared for discrepancies; and previously unreported disclosures of Pakistani arms sales to the United States were reviewed to ensure the authenticity of other documents.

According to the records, the arms transfers were facilitated by Global Military Products, a division of Global Ordnance, a contentious arms trader whose connections to shady people in Ukraine were the focus of a recent New York Times piece.

U.S.-brokered arrangements to purchase Pakistani military equipment for Ukraine are documented by contracts, licencing, and requisition documents signed by American and Pakistani parties.

Sources familiar with the arrangement and a related document confirm that the State Department took the IMF into confidence regarding the undisclosed weapons deal, which contributed significantly to securing the bailout from the IMF.

Pakistan was having trouble meeting the IMF’s financing and refinancing targets connected to the country’s debt and foreign investment that were necessary to secure the loan. The sale of firearms was a lifesaver, with the money made from ammunition exports to Ukraine more than covering the shortfall.

The loan reduced economic pressure, allowing the military government to postpone elections and intensify the assault on Khan’s supporters and other dissenters. Elections could be a moment of truth in the protracted aftermath of Khan’s removal. The United States mostly kept quiet as massive human rights crimes in Pakistan cast doubt on the survival of that country’s shaky democracy.

“The premise is that we have to save Ukraine, that we have to save this frontier of democracy on the eastern perimeter of Europe,” Rafiq added. This country in Southeast Asia is going to have to foot the bill.

So they can be a dictatorship and their people can be denied the freedoms that every other celebrity in this country is saying we need to support Ukraine for — the freedom to choose our leaders, the freedom to have civic freedoms, the rule of law, and all these other things that may differentiate many European countries and consolidated democracies from Russia.

The Intercept reports that on May 23, 2023, Pakistan’s ambassador to the United States, Masood Khan, met with the United States’ assistant secretary of state, Donald Lu, at the State Department in Washington, D.C. to discuss how Pakistan’s arms sales to Ukraine could improve the country’s financial standing in the eyes of the International Monetary Fund.

The discussion was scheduled for a Tuesday in order to iron out any kinks before the meeting between U.S. Ambassador to Pakistan Donald Blome and then-Finance Minister Ishaq Dar was to take place in Islamabad the following Friday.

During their discussion on May 23rd, Lu informed Khan that the United States had cleared payment for Pakistan’s armaments production and that he would inform the International Monetary Fund (IMF) in confidence about the programme.

The IMF estimates the finance gap at around $2 billion, and Lu admitted that the Pakistanis estimated the armament contributions to be worth $900 million. He informed Khan that the exact number the United States would report to the IMF was still up for discussion.

According to a source in Pakistan Today, Dar brought up the IMF issue with Blome at their meeting on Friday, and “the meeting highlighted the significance of addressing the stalled IMF deal and finding effective solutions to Pakistan’s economic challenges.”

Following the story’s release, the Pakistani Ministry of Foreign Affairs issued a statement calling the allegation “baseless and fabricated.” The spokesperson claimed that “difficult but essential economic reforms” were implemented thanks to the bailout “negotiated successfully between Pakistan and the IMF.”

To paint these talks in any other light would be dishonest. Another statement from the spokesman read as follows: “Pakistan maintains a policy of strict neutrality in the dispute between Ukraine and Russia and, in that context, does not provide any arms and ammunition to them.” There are usually stringent end user restrictions attached to Pakistan’s defence exports.

A State Department representative flatly denied that the United States had any hand in securing the loan. The IMF review was a topic of conversation between Pakistan and IMF officials, the spokeswoman said. We continue to urge Pakistan to work constructively with the IMF on its reform programme, but the United States was not a part of those talks.

A representative for the IMF said the organisation was not pressed, but they declined to say whether or not the IMF was told about the weapons programme in confidence.

IMF spokesperson Randa Elnagar strongly refuted claims that the organisation had been subjected to pressure over its decision to offer financial assistance to Pakistan. (We reached out to Global Ordnance for comment, but they declined to comment.)

Democratic Maryland Senator Chris Van Hollen, a prominent figure in Washington on international issues, disputed the State Department’s denial.

When speaking to a group of Pakistani journalists earlier this month, Van Hollen said, “The United States has been very instrumental in making sure that the IMF came forward with its emergency economic relief.”

As the son of two State Department employees who were posted in Pakistan, Van Hollen is widely considered to have the most in-depth knowledge of Pakistan of any member of Congress. Van Hollen was born in Karachi.

Van Hollen told The Intercept on Tuesday in the Capitol that he learned of the United States’ role in facilitating the IMF loan from the Biden administration. Given the dire economic circumstances in Pakistan, “my understanding, based on conversations with folks in the administration, has been that we supported the IMF loan package,” he said.

Final-Minute Agreement with the IMF

On June 30, as part of a $6 billion deal reached in 2019, the International Monetary Fund (IMF) was scheduled to examine a planned payment of $1 billion, prompting the diplomatic conversation concerning the loan.

In the months and weeks leading up to the deadline, Pakistani authorities openly denied that they had severe issues in funding the new loan, despite the fact that failure to pass the assessment would mean no cash infusion.

Finance Minister Dar stated in early 2023 that the IMF was not requiring Pakistan to secure “external financing assurance,” or financial commitments from countries like as China, the Gulf nations, or the United nations.

However, in March of 2023, Dar’s optimistic judgement was openly disputed by the IMF person in charge of dealing with Pakistan. In an email to Reuters, IMF official Esther Perez Ruiz emphasised the need of borrowers proving their ability to make repayments. “Pakistan is not an exception,” Perez remarked.

Following the IMF’s announcement, Pakistani authorities scurried to find a workaround. According to published reports and confirmed by people familiar with the deal, the necessary finance amount was $6 billion.

The government of Pakistan stated it had acquired promises of almost $4 billion from Gulf countries to help them get there. If the United States were to inform the International Monetary Fund of the secret weaponry purchase for Ukraine, Pakistan’s financial sheet may grow by nearly a billion dollars.

According to Rafiq, a scholar at the Middle East Institute, “it was at an impasse because of the remaining $2 billion.” If the $900 million estimate is correct, then that sum represents over half of the total. That’s a huge difference in terms of the chasm that has to be crossed.

Rather than extending the previous series of loans and releasing the next $1.1 billion installment as planned on June 28, the IMF unexpectedly announced that it would be entering an agreement — “called a Stand-By Arrangement” — with fewer conditions, more favourable terms, and a value of $3 billion.