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Military Facelift

Army leaders shuffle jobs in an apparent effort to woo the West at a UN summit

By Ahmed Rashid/LAHORE

Far Eastern Economic Review
Issue cover-dated September 14, 2000

FOR MONTHS, PAKISTAN'S ruler, Gen. Pervaiz Musharraf, has laboured under a growing public perception that he is not his own man, instead beholden to a powerful junta of hardline generals whose foreign and economic policies have increased the international isolation and the fiscal crisis of the regime. As a result, the modernizing, liberal agenda that Musharraf articulated when he seized power last October has steadily become more Islamicist and conservative. But in a dramatic reshuffle of senior generals on September 1, Musharraf appeared to be reasserting himself, with his colleagues' approval.

The reshuffle was predetermined by the anticipated retirement of two lieutenant-generals, and was made no doubt by consensus within the junta. But the timing of the move was significant: The announcement was made just four days before Musharraf headed to New York to meet world leaders at the United Nations, a public test of the army's ability to participate in the world community and an opportunity to lobby for vital loans from the International Monetary Fund.

The most significant change is the replacement of Chief of General Staff Lt.-Gen. Aziz Khan--a former officer of the Interservices Intelligence, who, as the army's No. 2, gave critical support to Musharraf during the coup.

Aziz dominated decision-making in the regime's domestic and foreign policies. He is revered by Pakistani and Kashmiri Islamic fundamentalist parties, and was considered to be the architect of last year's seizure by Kashmiri guerrillas of the Kargil heights in Indian Kashmir, which led to six weeks of bitter fighting between India and Pakistan. He was also credited with Pakistan's sustained support of the Taliban in Afghanistan despite growing international condemnation. His replacement, Lt.-Gen. Yousuf Khan, is not known for strong ideological leanings.

The United States and other Western countries remain highly critical of the army's reluctance to moderate its foreign policy toward India and cut ties with the Taliban, and its refusal to sign the anti-nuclear Comprehensive Test Ban Treaty. In this context, says a senior Western diplomat in Islamabad, "Aziz's removal from day-to-day policy-making is a very important signal, especially to the Americans."

Aziz has been sent to Lahore as corps commander. A retired army officer hints that Aziz cooperated in the job change: "Aziz had become too controversial and both he and Musharraf knew it."

Musharraf also made an attempt to restore crumbling business and investor confidence by removing Lt.-Gen. Mohammed Amjad as chairman of the National Accountability Bureau. Over the past 10 months, the NAB has generated fear and capital flight by arresting, in secretive midnight raids, top politicians and businessmen suspected of tax evasion and corruption. Amjad's replacement, Lt.-Gen. Khalid Maqbool, who was corps commander in Lahore, is expected to tone down the NAB's methods.

Three other lieutenant-generals were reposted and two major-generals promoted, giving Musharraf greater scope in bringing his own men into top army slots.

But while Pakistanis and foreign diplomats alike speculate that Musharraf may now move more quickly to restore democracy and moderate the country's foreign policy, that may be overly optimistic. Unlike any past military ruler, Musharraf depends heavily on officers who have served in the powerful Interservices Intelligence, which runs Kashmir and Afghan policy. Four of his most senior advisers are ex-ISI officers, and of them only Aziz has been distanced. The present head of the ISI, Lt.-Gen. Mehmood Ahmed, is one of Musharraf's closest advisers.

Meanwhile, the participation of Aziz and others in the reshuffle speaks volumes for the army's monolithic unity. This unity, along with the army's consensus system of policy-making at the top means that Musharraf cannot bring changes quickly even if he wants to.

Musharraf also has to watch his back. The Islamic parties, who pose the strongest challenge to the regime and have become power-hungry in the vacuum created by the discrediting of mainstream secular parties, are perturbed by the reshuffle. "It's been done to win support from the Americans," says a senior leader of the Jamaat-e-Islami, the country's largest fundamentalist party. "But neither the army nor we will allow any change in Kashmir policy," he adds.

Musharraf desperately needs an IMF loan before December 31, when the moratorium on interest payments on Pakistan's $38 billion in foreign debt expires. Without an IMF loan in place, negotiating another moratorium will be impossible, leaving Islamabad to begin repaying $4.5 billion in interest due next year.

Pakistan can't afford repayment. According to the State Bank of Pakistan, the country has foreign-exchange reserves of $1.2 billion, down from $1.5 billion just after the coup. However, as $452 million of the reserves are represented by deposits placed with the central bank by private commercial banks, and other commitments, available reserves are $600 million--enough for just three weeks of imports. An IMF loan would also release several billion dollars from other lending agencies, including the World Bank.

Even though the army has met some of the IMF's conditions for a loan--including starting to document the black economy, imposing a 15% sales tax on retail trade and services, and allowing the rupee to float against the U.S. dollar--other measures remain to be taken. These include a larger devaluation of the rupee, energy-price increases, a more broad-based agricultural income tax and a resolution of the long-running stand-off with private power company Hubco.

During his New York visit, Musharraf was due to meet UN Secretary-General Kofi Annan, U.S. Secretary of State Madeleine Albright and representatives from the IMF. He was certainly hoping that the reshuffle, though perhaps little more than a facelift, would win him support for loans.

IMF TEAM TO ASSESS ECONOMIC PROGRESS

The IMF is in no hurry. After a three-month delay, it has agreed to send an assessment mission to Pakistan this month. "It's a little too early to be talking about a loan. As and when sufficient progress is made, there could be talks,"Fund spokesman Tom Dawson told journalists in Washington.

The IMF is unlikely to consider giving a loan until figures for the first quarter of the financial year, July to September, are available early next month. Even then, say Western diplomats, the Fund is unlikely to accept Pakistan's request for a $2.5 billion "Poverty Reduction and Growth Facility" and is more likely to grant a much smaller, emergency loan to stave off a default in December and allow Pakistan to negotiate another moratorium with lenders.

For their part, the fundamentalists want no IMF deal. "We should not pay the debts taken by our corrupt politicians," says Maulana Fazlur Rehman, leader of the Jamiat Ullema Islam, an influential, hardline Islamic party.

Whereas after the coup Musharraf had promised a revival of the economy, he is now grappling with economic survival. One way out for the army--strongly urged by Japanese Prime Minister Yoshiro Mori on a late-August visit to Islamabad--is for Pakistan to sign the Comprehensive Test Ban Treaty, which would do much to mollify Western lenders. But Musharraf has ruled that out until India does so also.

For many, the key question is how long the army can maintain its hard line when the money has gone. Reshuffle or not, the army will find it increasingly difficult to promote any kind of policy when its well has run dry.

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