Pakistani Military Developments/feb-june 09

Neo

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The comment is not without precedent. The following article should clarify:

Pak spent bulk of US aid on arming against India
How is this related to the topic?
USaid isn't the same as IMF money, which is a loan meant for ecoomic and monetary support only.

Btw, the claims that Pakistan used the money to arm itself was never proven, Neo-cons used it to to halt aid but failed miserably! You may be aware that Biden recently got approval from the Congress to tripple non military aid to $1.5 billion per year... If the claim was valid, the Biden bill would never have see the daylight.
 
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Poverty in Pakistan, Terrorism, and the IMF

http://commentsfromleftfield.com/2008/11/poverty-terrorism-and-the-imf

Poverty in Pakistan, Terrorism, and the IMF

From the intelligence gathered thus far, the consensus opinion on the Mumbai terrorists is they are Islamist extremists who hail from Pakistan. File that revelation under “no surprise”. But information about the lone captured terrorist, Mohammad Ajmal Mohammad Amin Kasab, and how it ties into economic news, could be startling.

UK newspaper the Observer had the now fortunate (for a news organization) coincidence of traveling to the Pakistani cities of Multan and Bahawalpur last week. They describe Bahawalpur as “the biggest recruiting base of the militant groups currently being blamed by India for the Mumbai attack”; a center for the terrorist organization Lashkar-e-Taiba. What is Kasab’s connection to this? He is from Faridkot, a town close to these two cities.

I haven’t seen the demographics on these cities, but I’m guessing that poverty exists and is rampant.

This is an educated guess, based on this paragraph from the Observer article:

For most militants in the region the story - and that of Azam Amir Kasab is unlikely to be very different - starts at school. The southern Punjab has one of the highest concentrations of religious schools or madrassas in south Asia. Most teach the ultra-conservative Deobandi strand of Islam that is also followed by the Afghan Taliban and, crucially in this desperately poor land, offers free classes, board and lodging to students.

If these schools offered free room and board to a population that didn’t need it, then their power would be diminished. But that’s not the kind of world Pakistanis live in. Pakistan is in economic trouble. As I pointed out a couple weeks ago (in a jab to the GM bailout package), Pakistan needs a $7.6 billion loan from the International Monetary Fund to stay afloat this year. (Recently, I’ve seen some articles saying more IMF money is needed, and might have to amend that post in the future.) IMF money doesn’t come without a price, though — and I’m not talking about Pakistan simply having to pay off the loans in the future. Poverty is attached to the IMF price tag, too:

ISLAMABAD, Nov 28: Conditions attached to the $7.6 billion International Monetary Fund loan are expected to cause up to three million job cuts in different sectors and push another 5.6 million to 7.5 million Pakistanis into poverty over the next two years. [...]

When asked about the immediate fallout of the conditions which was aimed at slowing down the import-led economic growth, Mr Shirani [Chief Economist of the Royal Bank of Scotland] said that two to three million people would lose their jobs in various sectors, including fertiliser, manufacturing and services.

He said the GDP growth was expected to slow down to 3.4 per cent this year. “Some 5.6 to 7.5 million people will be added to the existing number of poor”.

Quite the vicious circle we having going in Pakistan: Poverty causes terrorism, but poverty is caused by poor economic conditions and them coming to us for money. I know that statement can be argued on two fronts: 1) Pakistan’s economic doldrums is a fault of their domestic policy (like spending gobs of money to pursue a nuclear weapon, and constant coups and instability making international investors wary of investing there); and 2) the IMF is made up of many other countries besides the United States. I can’t argue number one — Pakistan has screwed themselves over. But we’re part of the problem. The US holds the most sway in the IMF, so we have the most power in deciding not only where the money goes but under what program and loan repayment structure.

IMF loans help exacerbate poverty in Pakistan, which feeds into the power of extremist religious schools. The teachers at these schools are not shy, either, as the Observer reports:

In Bahawalpur the Jaish-e-Mohammed group, believed responsible for a string of brutal attacks across south Asia, including the murder of Jewish American journalist Daniel Pearl, has been linked to two such madrassas. One is the headquarters of the group - a semi-fortified and forbidding complex in the centre of the town. The other is the Dar-ul-Uloom Medina, where the brother-in-law of Rashid Rauf, the Bahawalpur-based suspected British militant thought to have been killed in an American missile attack eight days ago, is a teacher. Surrounded by some of the 700 students, he told The Observer that ‘jihad’ was the duty of all his young charges. [...]

‘To fight in Afghanistan or Kashmir and to struggle against the forces who are against Islam is our religious duty,’ Chugti, who oversees the education of 40,000 students, told The Observer.

Poverty in Pakistan has aided and emboldened the extremists, so decreasing the poverty must be seen as a key stepping stone to international security and heading off more terrorist attacks. In that respect, the IMF loans to Pakistan must be restructured. Or else when Pakistan is blamed for the Mumbai attacks, it’s only fair that we share that blame, too. And don’t know about you, but personally, I feel ashamed.
 

Neo

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So what are you saying??? Pakistan legitimately has the money to buy all these toys?
Yes, we have a defence budget and a $165 billion economy. Military expenditures don't get financed by IMF or WB loans, they're usually granted by commercial banks, governments or sometimes by the manufacturer.

Pakistan is in the process of upgrading its armed forces...its all been budgeted.
 
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Rage

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How is this related to the topic?
USaid isn't the same as IMF money, which is a loan meant for ecoomic and monetary
It certainly is. The fact that the source of the aid was merely different does not detract from the fact that Pakistan did not use it for it's intended purpose. That here is the issue at the core of LETHALFORCE's comment: the very real plausibility that Pakistan may misuse IMF aid given its current prerogatives and the fact that a logical precedent already exists- if anything, under an even less corrupt government. In the former case, the aid was meant for a specific combative use; in the latter, it was envisaged to buttress Pakistan's flagging monetary reserves, and to aid in fiscal restructuring under stringent IMF conditions and provide leeway for monetary maneuvering. It is not inconceivable that if a government run by a dictator can so easily purloin funds for a self-sufficing and altogether divergent military agenda, its successor composed of convicted frauds and known thieves cannot do the same and find an easy excuse in the lack of a single source of accountability. My aim was merely to indicate that you cannot discount LETHALFORCE's comments because: a) a logical precedent exists b) Pakistan's strategic and security prerogatives are now far more urgent given the Taliban's de-facto victory in Sawat and India's own massive military build-up and c) that what goes on behind closed doors is something we can only speculate on, yet your own citizens admit that Zardari and co are not exactly a bastion of candor or integrity.

Btw, the claims that Pakistan used the money for arm itself was never proven, Neo-cons used it to to halt aid but failed miserably!
Prove the article false if you choose to make such a claim. Remember that the statement aforewith issued from the mouth of Obama himself (See: Obama says Pakistan misusing US aid for war against India). Remember also that the 'war on terror' was, and is, essentially a 'neo-con' war.

You may be aware that Biden recently got approval from the Congress to tripple non military aid to $1.5 billion per year... If the claim was valid, the Biden bill would never have see the daylight.
I disagree. You discount the fact that America's strategic interests supersede its concern for India's apprehension over Pakistan arming itself against India. The war in Afghanistan is not exactly smooth sailing, and given that no alternative logistics routes exist yet (although proposals for the same are now in deliberative space), America will keep providing aid to Pakistan through one channel or the other because they require Pakistan to keep the Khyber Pass free of insurgents at Pakistan's expense. You also misunderstand the fact that Pakistan is not spending (or has spent) ALL of its aid to arm itself against India - merely a part. And that part is an unappreciated, though perhaps unavoidable consequence.
 

Neo

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i have provided link Neo it is not a coincidence IMF loan and big military purchases happened at the same time why don't you tell me where the IMF money is going? I say it's to buy weapons and I gave a link whhy don't you give your answer with a credible link?
IMF money expenditures are closely monitored, any abuse would result in international embarassement and scandal. Every tranch comes with strings attached, we have to fulfill some parameters, meet some demands to get the second one. If the money is abused, we'll simply fail to meet the parameters.

For your info, first term ended with Pakistan meeting all the parameters.
 

pyromaniac

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IMF money expenditures are closely monitored, any abuse would result in international embarassement and scandal. Every tranch comes with strings attached, we have to fulfill some parameters, meet some demands to get the second one. If the money is abused, we'll simply fail to meet the parameters.

For your info, first term ended with Pakistan meeting all the parameters.
You make a good point..I would think that there are serious repercussions for doing something like that. However, I don't think that Pakistan is completely guilt free...something fishy is going on.
 

Rage

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IMF money expenditures are closely monitored, any abuse would result in international embarassement and scandal. Every tranch comes with strings attached, we have to fulfill some parameters, meet some demands to get the second one. If the money is abused, we'll simply fail to meet the parameters.
Thank you for posting this. This was going to be my addendum to my previous response: that IMF aid is inevitably closely monitored and is released in tranches that require the fulfillment of prerequisite conditions. Yet, we cannot ignore the fact that the United States will bring pressure to bear on the IMF to see its only currently viable logistics route remain intact- even if, for instance, these parameters are not met.

For your info, first term ended with Pakistan meeting all the parameters.
Could you corroborate your final statement (on all parameters for the 1st tranche being met by Pakistan) with a reasonable source?
 
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http://www.imf.org/external/np/vc/2008/120308.htm

Questions and Answers on the Pakistan program
Last Updated: December 15, 2008

1. What are the advantages to Pakistan of undertaking an IMF-backed program?

2. How did Pakistan get into these balance of payments difficulties to begin with?

3. What is the conditionality associated with this loan?

4. Why is the Fund asking Pakistan to raise interest rates when in other countries the Fund is suggesting monetary easing?

5. At the G-20 summit, there was agreement among ministers that fiscal stimulus was necessary to help countries deal with the financial crisis. Why is the Fund advocating fiscal tightening in the case of Pakistan?

6. Is the Fund insisting on cutting back development expenditures? Military expenditures?

7. The program calls for fiscal restraint and monetary tightening. Won't this hinder the government's ability to invest in health and education?

8. The program calls for the removal of energy and electricity subsidies–which will adversely affect the poor. How does the program plan to protect the poor from these price increases?

9. Will agricultural income be taxed under the program?

10. What will the charges be for this loan? Is Pakistan paying more than other countries who are borrowing from the Fund? Why were the previous loans to Pakistan much cheaper?

11. Will the loan that Pakistan is receiving from the Fund be used to repay bondholders?

12. Where is the IMF's money going? Will it be used for anti-terrorism military operations?

13. Is the Fund concerned that in the absence of stronger measures the program will not succeed?

14. What contingency measures are the authorities considering if things turn out worse than expected?
Q1. What are the advantages to Pakistan of undertaking an IMF-backed program?

A. Financing from the IMF will help to ease the path of adjustment, as well as restore macroeconomic stability and investor confidence. Further, IMF financial support will help fill the external financing gap, rebuild international reserves, and catalyze additional external assistance from Pakistan's development partners. Additional assistance from donors is essential to help finance the expanded social safety net and to allow for higher spending on development programs.
Q2. How did Pakistan get into these balance of payments difficulties to begin with?

A. Pakistan's macroeconomic situation deteriorated significantly in 2007/08 and the four months of 2008/09 on account of domestic and external factors. Adverse security developments, large exogenous price shocks (oil and food), and global financial turmoil buffeted the economy. These shocks, combined with policy inaction during the political transition to a new government, led to slower growth, higher inflation, and a sharp deterioration of the external position.
Q3. What is the conditionality associated with this loan?

A. The loan supports the authorities' program, which has two key objectives: (i) restoring macroeconomic stability and confidence in the economy through a significant tightening of macroeconomic policies, and (ii) ensuring social stability and adequate support for the poor. The conditionality associated with the IMF's financing reflects the targets and policies set out by the Government to meet these two objectives.

These targets, and the associated conditionality, focus on quarterly quantitative targets for: government borrowing from the State Bank of Pakistan, the budget deficit, international reserves and net domestic assets of the State Bank of Pakistan, contracting or guaranteeing of non-concessional loans by the public sector, and external arrears. There are also specific commitments for improvements in banking and tax legislation, strengthening the social safety net for poor households (including working with the World Bank to develop a more comprehensive and better targeted safety net), phasing out electricity subsidies, reducing foreign exchange market intervention by the State Bank of Pakistan, working toward elimination of inter-corporate circular debt, and transition to a single Treasury account.
Q4. Why is the Fund asking Pakistan to raise interest rates when in other countries the Fund is suggesting monetary easing?

A. The Fund believes that each country's interest rate policy should reflect its own situation and economic objectives. In Pakistan's case, a tightening of monetary policy is necessary to restore confidence in the Pakistani rupee, help rebuild international reserves, and ensure that the domestic financing requirement of the government is met through market placements of government securities. To this end, higher interest rates are needed. Interest rates remain negative in real terms following the recent increases, even when compared with core inflation. The recent increase in interest rates will benefit domestic savers and reduce the implicit subsidy received by borrowers. It will also help reduce inflation, which will benefit the poor.
Q5. At the G-20 summit, there was agreement among ministers that fiscal stimulus was necessary to help countries deal with the financial crisis. Why is the Fund advocating fiscal tightening in the case of Pakistan?

A. Pakistan's circumstances are different from those of most G-20 countries, which have stronger fiscal positions and where a fiscal stimulus is needed to deal with recessionary pressures associated with the global financial crisis. Pakistan, on the other hand, faces severe balance of payments pressures stemming in part from loose financial policies. The global financial crisis is a contributory but not the principal cause of macroeconomic imbalances in Pakistan. Further, although economic activity has slowed in Pakistan, the economy is still growing. Accordingly, fiscal and monetary tightening are needed to address Pakistan's macroeconomic imbalances.

continued below
 

pyromaniac

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http://www.imf.org/external/np/vc/2008/120308.htm

Questions and Answers on the Pakistan program
Last Updated: December 15, 2008

1. What are the advantages to Pakistan of undertaking an IMF-backed program?

2. How did Pakistan get into these balance of payments difficulties to begin with?

3. What is the conditionality associated with this loan?

4. Why is the Fund asking Pakistan to raise interest rates when in other countries the Fund is suggesting monetary easing?

5. At the G-20 summit, there was agreement among ministers that fiscal stimulus was necessary to help countries deal with the financial crisis. Why is the Fund advocating fiscal tightening in the case of Pakistan?

6. Is the Fund insisting on cutting back development expenditures? Military expenditures?

continued below
I dont know about the first five, but I remember reading somewhere that Pakistan has issued a temporary Defense spending freeze and asked India and China to follow suite. This was like 2 days before India unveiled its massive defense budget though...so I don't know the latest news.
 
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Q6. Is the Fund insisting on cutting back development expenditures? Military expenditures?

A. The Government's program targets a reduction in the budget deficit to more sustainable levels. The Government proposes to do this both by raising revenues and by expenditure cuts targeted principally at phasing out fuel and electricity subsidies and better prioritizing development spending in 2008/09. The Fund is more concerned with aggregate spending and revenue targets than their detailed composition. However, given the importance of adequate funding for priority development projects in Pakistan, the Fund supported program includes `adjustors' which allow for larger than projected development spending if external assistance turns out to be higher than envisaged. The program also makes specific provisions to ensure an appropriate level of poverty-related spending in 2008/09 and the future. Further, the elimination of energy subsidies will create fiscal space for higher development expenditure in 2009/10. Military expenditures were not part of the discussions.
Q7. The program calls for fiscal restraint and monetary tightening. Won't this hinder the government's ability to invest in health and education?

A. Fiscal restraint and monetary tightening should not hinder the government's ability to invest in health and education. The program allows for continued spending on health and education in the near term. Over the medium term, the strong tax effort envisaged in the program will help create the fiscal space needed for higher expenditures on health, education, and physical infrastructure.
Q8. The program calls for the removal of energy and electricity subsidies-which will adversely affect the poor. How does the program plan to protect the poor from these price increases?

A. Developing effective and well financed safety nets to ease the burden of macroeconomic adjustment on the poor is a high priority which the Fund fully supports. To this end, the Government's program envisages a strengthening and better targeting of the social safety net in order to protect the poor and cushion the impact of the elimination of subsidies on vulnerable groups. Social safety net spending is targeted to increase by 0.6 percentage points of GDP in 2008/09, to 0.9 percent of GDP, to protect the poor through both cash transfers and targeted measures, and the government is discussing a plan with World Bank staff to develop a comprehensive and better targeted social safety net. Also, electricity tariffs incorporate a "lifeline" minimum tariff that will shield low-income households consuming small amounts of electricity from tariff increases. Additional external assistance is being sought from bilateral donors to cover the cost of the expanded social safety net.

The targeted reduction in inflation will also help the poor. The poor are most severely affected by the current high level of inflation because they do not have the ability to protect themselves through investment in assets such as foreign exchange and real estate.
Q9. Will agricultural income be taxed under the program?

A. The IMF-supported program does not envisage a new tax on agricultural income.
Q10. What will the charges be for this loan? Is Pakistan paying more than other countries who are borrowing from the Fund? Why were the previous loans to Pakistan much cheaper?

A. Pakistan is paying the same rate as other countries that have stand-by arrangements with the Fund. Stand-by arrangements are subject to the IMF's market-related interest rate, known as the "rate of charge," and carry a level based surcharge. The current "rate of charge" is 2.1% and varies on a weekly basis, in line with short-term interest rates in major international money markets. Large loans, i.e., credit above 200 percent of a member's quota carry a surcharge of 100 basis points above the regular rate of charge, and the surcharge rises to 200 basis points for use of credit above 300 percent of quota. Thus, based on today's interest rates, the average charge that Pakistan would pay when it has the full amount of $7.6 billion outstanding is about 3.0%.

In the past, Pakistan has had both stand-by arrangements and an arrangement under the Poverty Reduction and Growth Facility (PRGF). Loans under the PRGF carry an annual interest rate of 0.5 percent. However, PRGF loan amounts available are limited to a maximum of 185 percent of quota for the initial three-year arrangement, and then to 90 percent of quota for second time the facility is used. Given Pakistan's large financing needs, borrowing under the PRGF was not an option.
Q11. Will the loan that Pakistan is receiving from the Fund be used to repay bondholders?

A. Disbursements of the IMF loan will be made to the State Bank of Pakistan to rebuild the international reserves position. At the same time, the program assumes that the government will remain current in all its external obligations.
Q12. Where is the IMF's money going? Will it be used for anti-terrorism military operations?

A. IMF disbursements will be used to build the international reserves position of the State Bank of Pakistan. They will not be used to finance budgetary expenditures nor anti-terrorism military operations.
Q13. Is the Fund concerned that in the absence of stronger measures the program will not succeed?

A. The program seeks to address the current macroeconomic imbalances while preserving social stability and protecting the poor. With sustained and forceful implementation, the program should succeed. Building domestic consensus around the measures included in the authorities' package constitutes a key factor in the period ahead. The policies in the program should help bring down inflation and reduce the external current account deficit to more sustainable levels. At the same time, a restoration of investor confidence is expected to help strengthen the reserve position.
Q14. What contingency measures are the authorities considering if things turn out worse than expected?

A. The authorities believe the program is well-designed and adequate to address the current economic challenges. However, if things turn out worse than expected and contingency measures become necessary, the authorities are open to considering a further tightening of fiscal and monetary policies. The authorities are also confident that further financial support will be forthcoming from bilateral donors.

For more information on the program see: http://www.imf.org/external/pubs/cat/longres.cfm?sk=22517.0

There is no transparency or accountability of how the funds will be spent how they will be given or in what way except to state bank of pakistan there are many loopholes for diversion.
 
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I dont know about the first five, but I remember reading somewhere that Pakistan has issued a temporary Defense spending freeze and asked India and China to follow suite. This was like 2 days before India unveiled its massive defense budget though...so I don't know the latest news.
this is the latest I posted the whole thing,only hold up is IMF hadn't printed the money, there is not much transparency or accountability or details of trounches
 

Neo

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Neo, the only reason Pakistan is not bankrupt is because the world bank and American give you aid. Also, if you referring to India as a poverty stricken land then well..all I have to say is this; 4rth largest economy in the world >>>>> Bankrupt pakistan. One more thing, please answer my previous question. I would really like to get a Pakistani's perspective on this matter.
Don't put words in my mouth...I replied using same logic you did. Lets not turn this in a dickmeasuring thread. IMF would not grant loan...certainly not the second tranch if she didn't have faith that she'll get het money back.
One of the reasons US is aiding Pakistan is because it serves their interests too. Nothing comes free from US, we're paying a heavy price for this socalled alliance.

Pakistan is facing a monetary crisis so what, many countries are hit by recession, its a global problem.

Don't forget that India too faced similar crisis in the nineties but managed to survice. We'll do the same...economy is already back on track. KSE gained more than 400 points two days ago. Private enterprizes attracted $1.38 billion in FDI last year.

EDIT - THough original post was addressed but this post has some valid points
 

Neo

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http://www.voanews.com/english/archive/2008-10/2008-10-22-voa38.cfm

Reluctant Pakistan Considers IMF Loan to Avoid Default

Neo if pakistan is not in bad economic shape why hav humiliating headlines like this?
Where did I claim that we're not in bad shape? Things went from bad to worse when we allowed BB and NS to enter the country...then the CJ visited Karachi. We lost more than $1.5 billion in riots...Karachi burnt for few days, and spent another $0.4 billion in election commaigns and security. Benazir got asassinated...more riots resulting in more demage and political instablity. Forex took a nose dive, foreign investors started pulling back and then there was the energy crisis. Its a miracle that we're still there! To avoid default we went to IMF, its not the first time a country has done that. Argentina, Turkey, several EU countries all went to IMF at certain point. Nothing humiliating there.
 

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WoT reimbursements/aid during Bush reign and IMF loans are 2 completely separate things.

Though US Congress had pointed out at alleged misuse of funds by Pakistan, yet as Neo said nothing of the sort was officially published, but if Pak indeed was squeaky clean in utilising its funds why else would Obama administration "punish" it by seeking greater accountability, tying aid to performance, delay payments when Pakistan acutely needs them etc. ?

US has practically spelled out where the money will be spent and how much, contrast this too relatively unconditional aid during Bush's term.

As for misappropriation such allegations even if true couldn't be publicly revealed as that would tantamount to NATO operations in Afghanistan being jeopardized. US is taking appropriate actions against Pakistan and Pakistan is "reaping" the benefits of its location.
 

Neo

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WoT reimbursements/aid during Bush reign and IMF loans are 2 completely separate things.
Thank you!

Though US Congress had pointed out at alleged misuse of funds by Pakistan, yet as Neo said nothing of the sort was officially published, but if Pak indeed was squeaky clean in utilising its funds why else would Obama administration "punish" it by seeking greater accountability, tying aid to performance, delay payments when Pakistan acutely needs them etc. ?

US has practically spelled out where the money will be spent and how much, contrast this too relatively unconditional aid during Bush's term.

As for misappropriation such allegations even if true couldn't be publicly revealed as that would tantamount to NATO operations in Afghanistan being jeopardized. US is taking appropriate actions against Pakistan and Pakistan is "reaping" the benefits of its location.
Valid point, though off-topic. The thread got hi-jacked and derailed and I don't want to see it go down the drain.
 

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Pakistan Army chief arrives in US

Washington (PTI): The Pakistani Army chief General Ashfaq Parvez Kayani has arrived here to discuss the proposed comprehensive review of the American policy for Pakistan and Afghanistan.

This is Kayani's first visit to the US after becoming army chief in November 2007.

During his week-long tour beginning today, Kayani will have series of meetings with his US counterpart and top officials of Obama administration, on issues which would dominate around the fight against Taliban terrorists in Pakistan's restive tribal areas bordering Afghanistan.

Gen Kayani is expected to call on Admiral Mike Mullen, Chairman of the Joint Chief of Staff; Gen David Petraeus, Commander of the US Central Command, besides meeting the Secretary of Defense Robert Gates.

http://www.hindu.com/thehindu/holnus/000200902230911.htm
 

.v0id

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I Delete 9 off-topic Posts.

Members , Back On Topic Please.
 

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I don't understand what you mean by that.
Please support your claim that these weapons will be purchased with IMF money. I'm sure you know more than I do. If not please refrain from making such statements, it doesn't add any value to the debate except for cheap sarcasm.
If you had a real answer for Pakistan's legtimate expenditure on its defence spending then rather then giving suggestions and judgement you may yourself come out with valid link. Since on google search engines there are numerous link suggesting Pakistan's use of foriegn aid towards Military spending against India.:vehicle_plane:
 

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GENTLEMEN i am opening a new THREAD for pakistan economy please take your economic discussion there.
no more derailing this thread
.

THIS THREAD IS STRICTLY FOR PAKISTANI ARMY AND NEWS DISCUSSION.
 

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