Order Code IB94041
CRS Issue Brief for Congress
Received through the CRS Web
Pakistan-U.S. Relations
Updated March 6, 2006
K. Alan Kronstadt
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Historical Background
Pakistan-India Rivalry
The China Factor
Pakistan’s Political Setting
Pakistan-U.S. Relations and Key Country Issues
Security
International Terrorism
Domestic Terrorism
Pakistan-U.S. Security Cooperation
Nuclear Weapons and Missile Proliferation
U.S. Nonproliferation Efforts
Pakistan-India Tensions and the Kashmir Issue
Islamization and Anti-American Sentiment
Democratization and Human Rights
Democracy and Governance
Human Rights Problems
Narcotics
Economic Issues
Overview
Trade and Investment
U.S. Aid and Congressional Action
U.S. Assistance
Proliferation-Related Legislation
Coup-Related Legislation
Other Legislation
9/11 Commission Recommendations

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Pakistan-U.S. Relations
SUMMARY
A stable, democratic, economically
tants into Indian Kashmir, a charge Islamabad
thriving Pakistan is considered vital to U.S.
denies. The United States reportedly has
interests in Asia. Key U.S. concerns regarding
received pledges from Islamabad that all
Pakistan include regional terrorism; Pakistan-
“cross-border terrorism” would cease and that
Afghanistan relations; weapons proliferation;
any terrorist facilities in Pakistani-controlled
the ongoing Kashmir problem and Pakistan-
areas would be closed. Similar pledges have
India tensions; human rights protection; and
been made to India. The United States strong-
economic development. A U.S.-Pakistan
ly encourages maintenance of a cease-fire
relationship marked by periods of both coop-
along the Kashmiri Line of Control and con-
eration and discord was transformed by the
tinued substantive dialogue between
September 2001 terrorist attacks on the United
Islamabad and New Delhi.
States and the ensuing enlistment of Pakistan
as a pivotal ally in U.S.-led counterterrorism
Pakistan’s macroeconomic indicators
efforts. Top U.S. officials regularly praise
have turned positive since 2001, but wide-
Islamabad for its ongoing cooperation, al-
spread poverty persists. President Bush seeks
though doubts exist about Islamabad’s com-
to expand U.S.-Pakistan trade and investment
mitment to some core U.S. interests. Pakistan
relations. Democracy has fared poorly in
is identified as a base for terrorist groups and
Pakistan; the country has endured direct mili-
their supporters operating in Kashmir, India,
tary rule for half of its existence. In 1999, the
and Afghanistan. Since late 2003, Pakistan’s
elected government was ousted in a coup led
army has been conducting unprecedented
by Army Chief Gen. Pervez Musharraf, who
counterterrorism operations in traditionally
later assumed the title of president. Supreme
autonomous western tribal areas.
Court-ordered elections in 2002 seated a new
civilian government (Musharraf ally Shaukat
A potential Pakistan-India nuclear arms
Aziz is prime minister), but it remains weak,
race has been the focus of U.S. nonprolifera-
and Musharraf has retained his position as
tion efforts in South Asia. Attention to this
army chief. The United States urges the
issue intensified following nuclear tests by
restoration of democracy and expects Paki-
both countries in May 1998; the tests triggered
stan’s planned 2007 general elections to be
restrictions on U.S. aid to both countries
free and fair. Congress has granted presiden-
(remaining nuclear-related sanctions on Paki-
tial authority to waive coup-related aid sanc-
stan were waived in October 2001). Pakistan
tions through FY2006.
and India have fought three wars since 1947.
Recently, the United States has been troubled
Pakistan is among the world’s leading
by evidence of “onward” proliferation of
recipients of U.S. aid, obtaining some $2.63
Pakistani nuclear technology to third parties,
billion in direct U.S. assistance for FY2002-
including North Korea, Iran, and Libya. Such
FY2005, including $1 billion in security-
evidence became stark in February 2004.
related aid. Pakistan also has received billions

of dollars in reimbursement for its support of
Separatist violence in India’s Muslim-
U.S.-led counterterrorism operations. See also
majority Jammu and Kashmir state has contin-
CRS Report RL32259, Terrorism in South
ued unabated since 1989. India has blamed
Asia; and CRS Report RL32615, Pakistan’s
Pakistan for the infiltration of Islamic mili-
Domestic Political Developments.
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
President Bush traveled to Pakistan March 3-4 for the first such presidential visit in six
years. The Pakistani capital was under extremely heavy security for the President’s visit.
In a February 22 speech, the President called Pakistan a “key ally in the war on terror” and
said the United States wants to “build a broad and lasting strategic partnership with the
people of Pakistan.” This partnership is to be implemented through a new Strategic Dialogue
in seven major issue-areas as found in the March 4 Joint Statement issued by President Bush
and Pakistani President Musharraf. The Joint Statement emphasizes shared U.S.-Pakistan
interests and calls for a significant expansion of bilateral economic ties. Talks between the
two leaders focused on Pakistan’s vital role in regional counterterrorism efforts. President
Bush also urged Pakistan and India to continue their bilateral peace initiative, praised
Musharraf for his courage, congratulated Pakistan on its “strong economic growth,” and
insisted that Pakistan’s slated 2007 national elections “need to be open and honest.” Coming
on the heels of his lengthier and arguably more substantive trip to India, President Bush’s
Pakistan visit was seen by many as further evidence of a more India-centric U.S. policy in
South Asia, with some in Pakistan concerned about the geopolitical implications of this
apparent dynamic. While the President was in New Delhi, another major step was taken
toward proposed civil nuclear cooperation between the United States and India. Musharraf
has expressed Pakistan’s desire for similar treatment, but this is not forthcoming, with top
U.S. officials suggesting that Pakistan’s “different history” (an oblique reference to incidents
of nuclear proliferation) preclude such cooperation in the foreseeable future.
President Bush’s trip came at a time when Pakistan’s domestic security circumstances
have become a serious issue. Just one day before the President’s arrival in Islamabad, an
apparent suicide car bombing outside the U.S. consulate in Karachi killed at least four
people, including an American diplomat (the same consulate had been attacked in June
2002). Also underway at the time of the President’s visit was heavy fighting between
Pakistani security forces and Islamic militants in North Waziristan, where a March 1 attack
on a suspected Al Qaeda camp spurred a brazen militant thrust into the administrative capital
of Miranshah. By the time Pakistani soldiers backed by helicopter gunships and artillery
secured the town, Islamabad was reporting that 120 militants and 5 soldiers had been killed.
Meanwhile, in the Baluchistan province, clashes between security forces and tribal militants
continue, costing scores or perhaps hundreds of lives, and a February sectarian bombing and
rioting left more than 30 dead in Punjab. Moreover, anti-Western and anti-American
sentiments continue to run high in Pakistan, fueled by anger over apparent U.S.-launched
missile attacks on targets in Pakistan near the Afghan border in December 2005 and January
2006, and the publication in European newspapers of cartoons deemed offensive to Muslims,
along with opposition to U.S. policies and to Islamabad’s alliance with Washington.
On February 15, Afghan President Karzai arrived in Islamabad for a visit focused on
increasing security along the Pakistan-Afghanistan border, and Afghan officials claimed that
recent suicide bombings in Afghanistan appear to have been orchestrated by Taliban
fugitives operating out of Pakistan (President Musharraf later criticized Karzai for “bad-
mouthing” Pakistan). On the same day, apparent Baloch separatist militants shot and killed
three Chinese engineers and their Pakistani driver in Baluchistan. On February 18, the “Thar
Express” railroad linking Sindh with India’s Rajasthan state was resumed after more than
four decades in suspension. On February 19, Musharraf visited Beijing, where Pakistan and
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China inked agreements to expand bilateral cooperation. More information is in CRS Report
RS21584, Pakistan: Chronology of Recent Events.
BACKGROUND AND ANALYSIS
Historical Background
The long and checkered Pakistan-U.S. relationship has its roots in the Cold War and
South Asia regional politics of the 1950s. U.S. concerns about Soviet expansionism and
Pakistan’s desire for security assistance against a perceived threat from India prompted the
two countries to negotiate a mutual defense assistance agreement in 1954. By 1955, Pakistan
had further aligned itself with the West by joining two regional defense pacts, the South East
Asia Treaty Organization and the Central Treaty Organization (or “Baghdad Pact”). As a
result of these alliances, Islamabad received nearly $2 billion in U.S. assistance from 1953
to 1961, one-quarter of this in military aid. Differing expectations of the security relationship
have long bedeviled bilateral ties. During and immediately after the Indo-Pakistani wars of
1965 and 1971, the United States
suspended military assistance to both
sides, resulting in a cooling of the
PAKISTAN IN BRIEF
Pakistan-U.S. relationship and a
Population: 162 million; growth rate: 2.03% (2005
perception among many in Pakistan
est.)
that the United States was not a reliable
Area: 803,940 sq. km. (slightly less than twice the
size of California)
ally. In the mid-1970s, new strains
Capital: Islamabad
arose over Pakistan’s efforts to respond
Ethnic Groups: Punjabi, Sindhi, Pashtun, Baloch,
to India’s 1974 underground nuclear
Muhajir (immigrants from India at the time of
test by seeking its own nuclear
partition and their descendants)
Languages: Punjabi 58%, Sindhi 12%, Pashtu 8%,
weapons capability. U.S. aid was
Urdu 8%; English widely used
suspended by the Carter Administration
Religions: Muslim 97% (Sunni 77%, Shia 20%),
in 1979 in response to Pakistan’s
Christian, Hindu, and other 3%
covert construction of a uranium
Life Expectancy at Birth: female 64.0 years; male
enrichment facility. However,
62.0 years (2005 est.)
Literacy: female 35%; male 62% (2004 est.)
following the Soviet invasion of
Gross Domestic Product (at PPP): $376 billion; per
Afghanistan later that year, Pakistan
capita: $2,400; growth rate 8.1% (2005 est.)
again was viewed as a frontline ally in
Inflation: 8.9% (2005 est.)
the effort to bloc k S o v i et
Military Expenditures: $3.85 billion (4.9% of
expansionism. In 1981, the Reagan
GDP; 2004)
U.S. Trade: exports to U.S. $3.26 billion; imports
Administration offered a five-year,
from U.S. $1.175 billion (2005 est.)
$3.2 billion aid package to Islamabad.
Sources: CIA World Factbook; U.S. Commerce Department;
Pakistan became a key transit country
Economist Intelligence Unit
for arms supplies to the Afghan
resistance, as well as a camp for some
three million Afghan refugees, most of
whom have yet to return.
Despite the renewal of U.S. aid and close security ties, many in Congress remained
troubled by Pakistan’s nuclear weapons program. In 1985, Section 620E(e) (the Pressler
amendment) was added to the Foreign Assistance Act, requiring the President to certify to
Congress that Pakistan does not possess a nuclear explosive device during the fiscal year for
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which aid is to be provided. With the Soviet withdrawal from Afghanistan, Pakistan’s
nuclear activities again came under intensive U.S. scrutiny and, in 1990, President Bush
again suspended aid to Pakistan. Under the provisions of the Pressler amendment, most
bilateral economic and all military aid ended and deliveries of major military equipment
ceased. In 1992, Congress partially relaxed the scope of the aid cutoff to allow for food
assistance and continuing support for nongovernmental organizations. Among the notable
results of the aid cutoff was the nondelivery of F-16 fighter aircraft purchased by Pakistan
in 1989. In December 1998, the United States agreed to compensate Pakistan with $325
million in cash payment and $140 million in goods, including surplus wheat.
Pakistan-India Rivalry
Three full-scale wars — in 1947-48, 1965, and 1971 — and a constant state of military
preparedness on both sides of their mutual border have marked the half-century of bitter
rivalry between Pakistan and India. The acrimonious nature of the partition of British India
into two successor states in 1947 and the unresolved issue of Kashmiri sovereignty have been
major sources of tension. Both countries have built large defense establishments at
significant cost to economic and social development. The Kashmir problem is rooted in
claims by both countries to the former princely state, divided since 1948 by a military Line
of Control (LOC) into the Indian state of Jammu and Kashmir and Pakistan-held Azad (Free)
Kashmir. India blames Pakistan for supporting a violent separatist rebellion in the
Muslim-dominated Kashmir Valley that has taken perhaps 66,000 lives since 1989. Pakistan
admits only to lending moral and political support to the rebels, and it criticizes India for
alleged human rights abuses in Kashmir. The latest major armed clash with India was in
May-June 1999, when separatist militants backed by Pakistan Army troops crossed the LOC
near Kargil and were repulsed after six weeks of heavy fighting. During most of 2002, one
million Pakistani and Indian soldiers were mobilized at the shared border after India blamed
Pakistan-based terrorist groups for undertaking deadly attacks in India, including a December
2001 assault on the Indian Parliament complex. Yet an April 2003 peace initiative has
brought major improvement in the bilateral relationship, and led to a January 2004 summit
meeting and a joint agreement to re-engage a “composite dialogue” to bring about “peaceful
settlement of all bilateral issues, including Jammu and Kashmir, to the satisfaction of both
sides.” During 2004, numerous mid-level meetings, re-establishment of embassy staff and
consulates, increased people-to-people contacts, and a cease-fire at the border and LOC
brought modest, but still meaningful progress toward normalized relations. Regular dialogue
continued in 2005, although territorial disputes remain unresolved and Pakistani officials
regularly express unhappiness that progress on substantive issues is not occurring.
The China Factor
Pakistan and China have enjoyed a generally close and mutually beneficial relationship
over several decades. Pakistan served as a link between Beijing and Washington in 1971,
as well as a bridge to the Muslim world for China during the 1980s. China’s continuing role
as a major arms supplier for Pakistan began in the 1960s and included helping to build a
number of arms factories in Pakistan, as well as supplying complete weapons systems. After
the 1990 imposition of U.S. sanctions on Pakistan, the Islamabad-Beijing arms relationship
was further strengthened (see CRS Report RL31555, China and Proliferation of Weapons
of Mass Destruction and Missiles: Policy Issues). Indian officials have called the Islamabad-
Beijing nuclear and missile “proliferation nexus” a cause of serious concern in New Delhi,
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and U.S. officials remain seized of this dynamic. In December 2004, the Pakistani prime
minister visited Beijing, where Pakistan and China signed accords meant to boost bilateral
cooperation. In April 2005, the Chinese prime minister visited Islamabad, where Pakistan
and China signed 22 more such pacts. The Chinese government has assisted Islamabad in
constructing a major new port at Gwadar, near the border with Iran. Islamabad continues to
view Beijing as an “all-weather friend” and perhaps its most important strategic ally.
Pakistan’s Political Setting
The history of democracy in Pakistan is a troubled one, marked by tripartite power
struggles among presidents, prime ministers, and army chiefs. Military regimes have ruled
Pakistan for more than half of its 58 years of existence, interspersed with periods of generally
weak civilian governance. From 1988 to 1999, Islamabad had democratically elected
governments, and the army appeared to have moved from its traditional role of “kingmaker”
to one of power broker. Benazir Bhutto (leader of the Pakistan People’s Party) and Nawaz
Sharif (leader of the Pakistan Muslim League) each served twice as prime minister during
this period. The Bhutto government was dismissed for corruption and nepotism in 1996 and
Nawaz Sharif won a landslide victory in ensuing elections, which were judged generally free
and fair by international observers. Sharif moved quickly to bolster his powers by curtailing
those of the president and judiciary, and he emerged as one of Pakistan’s strongest-ever
elected leaders. Critics accused him of intimidating the opposition and the press. In October
1999, in immediate response to Sharif’s attempt to remove him, Army Chief Gen. Pervez
Musharraf overthrew the government, dismissed the National Assembly, and appointed
himself “chief executive.” In April 2002, after a controversial referendum, Musharraf
assumed the title of president. National elections were held in October of that year, as
ordered by the Supreme Court. In apparent contravention of democratic norms, Musharraf
continues to hold the dual offices of president and army chief. In February 2006, U.S.
Director of Intelligence Negroponte told a Senate panel that Musharraf has made “only
limited progress” in democratization efforts. The next national elections are slated for late
2007. President Bush has called those elections “an important test of Pakistan’s commitment
to democratic reform, and the Islamabad government must ensure that [they] are open and
free and fair.” (See “Democracy and Governance” section below. See also CRS Report
RL32615, Pakistan’s Domestic Political Developments.)
Pakistan-U.S. Relations and Key Country Issues
U.S. policy interests in Pakistan encompass a wide range of issues, including
counterterrorism, nuclear weapons and missile proliferation, South Asian and Afghan
stability, democratization and human rights, trade and economic reform, and efforts to
counter narcotics trafficking. Relations have been affected by several key developments,
including proliferation- and democracy-related sanctions; a continuing Pakistan-India nuclear
standoff and conflict over Kashmir; and the September 2001 terrorist attacks against the
United States. In the wake of those attacks, President Musharraf — under strong U.S.
diplomatic pressure — offered President Bush Pakistan’s “unstinted cooperation in the fight
against terrorism.” Pakistan became a vital ally in the U.S.-led anti-terrorism coalition. U.S.
sanctions relating to Pakistan’s 1998 nuclear tests and 1999 military coup quickly were
waived and, in October 2001, large amounts of U.S. aid began flowing into Pakistan. Direct
assistance programs include training and equipment for Pakistan security forces, along with
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aid for health, education, food, democracy promotion, human rights improvement, counter-
narcotics, border security and law enforcement, as well as trade preference benefits. The
United States also supports grant, loan, and debt rescheduling programs for Pakistan by the
various major international financial institutions. In June 2004, President Bush designated
Pakistan as a major non-NATO ally of the United States under Section 517 of the Foreign
Assistance Act of 1961. Revelations that Pakistan has been a source of nuclear proliferation
to North Korea, Iran, and Libya may complicate future Pakistan-U.S. relations.
Security
International Terrorism. After the September 2001 terrorist attacks on the United
States, Pakistan pledged and has provided major support for the U.S.-led anti-terrorism
coalition. According to the U.S. Departments of State and Defense, Pakistan has afforded
the United States unprecedented levels of cooperation by allowing the U.S. military to use
bases within the country, helping to identify and detain extremists, and tightening the border
between Pakistan and Afghanistan. Top U.S. officials regularly praise Pakistani anti-
terrorism efforts. In a landmark January 2002 speech, President Musharraf vowed to end
Pakistan’s use as a base for terrorism of any kind, and he banned numerous militant groups,
including Lashkar-e-Taiba and Jaish-e-Muhammad, both blamed for terrorist violence in
Kashmir and India and designated as terrorist organizations under U.S. law. In the wake of
the speech, thousands of Muslim extremists were detained, though most of these were later
released. In the spring of 2002, U.S. military and law enforcement personnel began engaging
in direct, low-profile efforts to assist Pakistani security forces in tracking and apprehending
fugitive Al Qaeda and Taliban fighters on Pakistani territory. Pakistani authorities have
remanded to U.S. custody approximately 500 such fugitives to date.
Important Al Qaeda-related arrests in Pakistan have included Abu Zubaydah (March
2002), Ramzi bin al-Shibh (September 2002), Khalid Sheik Mohammed (March 2003),
several key captures in the summer of 2004, and Abu Faraj al-Libbi (May 2005). Other
alleged Al Qaeda figures were killed in gunbattles and missile attacks, including several
apparent U.S.-directed attacks on Pakistani territory from aerial drones. Yet Al Qaeda and
Taliban fugitives remain in Pakistan and appear to have regrouped in Pakistani cities, as well
as in the mountainous tribal regions along the Afghan border. Al Qaeda founder Osama bin
Laden and his lieutenant, Egyptian Islamic radical Ayman al-Zawahiri, are themselves
believed to be in Pakistan. Meanwhile, numerous banned indigenous groups continue to
operate under new names: Lashkar-e-Taiba became Jamaat al-Dawat; Jaish-e-Mohammed
was re-dubbed Khudam-ul Islam. President Musharraf repeatedly has vowed to end the
activities of religious extremists in Pakistan and to permanently prevent banned groups from
resurfacing there. His policies likely spurred two lethal but failed attempts to assassinate him
in December 2003. Nonetheless, some analysts call Musharraf’s efforts cosmetic,
ineffective, and the result of international pressure rather than a genuine recognition of the
threat posed. In a February 2006 review of global threats, U.S. Director of Intelligence
Negroponte told a Senate panel that Pakistan “remains a major source of extremism that
poses a threat to Musharraf, to the United States, and to neighboring India and Afghanistan.”
(See also CRS Report RL32259, Terrorism in South Asia.)
Infiltration into Afghanistan. U.S. military commanders overseeing Operation
Enduring Freedom have since 2003 complained that renegade Al Qaeda and Taliban fighters
remain able to attack coalition troops in Afghanistan, then escape across the Pakistani
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frontier. They have expressed dismay at the slow pace of progress in capturing wanted
fugitives in Pakistan and urged Islamabad to do more to secure its rugged western border
area. U.S. government officials have voiced similar worries, even expressing concern that
elements of Pakistan’s intelligence agency might be assisting members of the Taliban.
Tensions between the Kabul and Islamabad governments — which stretch back many
decades — have at times reached alarming levels in recent years, with some top Afghan
officials accusing Pakistan of manipulating Islamic militancy in the region to destabilize
Afghanistan. During the autumn of 2003, in an unprecedented show of force, President
Musharraf moved 25,000 Pakistani troops into the traditionally autonomous tribal areas near
the Afghan frontier. The first half of 2004 saw an escalation of Pakistani Army operations,
many in coordination with U.S. and Afghan forces just across the international frontier (U.S.
forces have no official authorization to cross the border into Pakistan). Combat between
Pakistani troops and militants in the two Waziristan agencies has killed hundreds of Islamic
militants (many of them foreigners), Pakistani soldiers, and civilians. The battles, which
continue sporadically to date, exacerbate already volatile anti-Musharraf and anti-American
sentiments held by many Pakistani Pashtuns.
Kabul’s October 2004 elections were held without major disturbances, apparently in
part due to Musharraf’s commitment to reducing infiltrations. Yet concerns sharpened in
the spring of 2005, with U.S. military officials in Afghanistan again indicating that insurgents
opposed to the Kabul government were making hit-and-run attacks before returning to
Pakistan. In summer 2005, Afghan leaders accused Islamabad of actively supporting
insurgents and providing their leadership with safe haven. Islamabad adamantly denied the
charges and sought to reassure Kabul by dispatching an additional 9,500 troops to border
areas, bringing the total to 80,000. Still, with 90 fatalities, 2005 was the deadliest year ever
for U.S. troops in Afghanistan and, by the end of the year, there were indications that
Islamabad’s efforts to control the tribal areas were meeting with little success. Musharraf’s
“carrot and stick” approach of offering amnesty to those militant tribals who “surrender,” and
using force against those who resist, clearly has not rid the region of indigenous Islamic
militants or Al Qaeda operatives, even as Islamabad’s ability to collect actionable
intelligence there may be increasing. Late 2005 and early 2006 missile attacks on suspected
Al Qaeda targets — apparently launched by U.S. aerial drones flying over Pakistani territory
— may be signs of a shifting U.S. strategy that entails use of U.S. military assets in areas
where the Pakistanis are either unable or unwilling to strike. One result could be increasing
Pakistan resentment at the perception that the country’s sovereignty is under threat.
Infiltration into Kashmir. Islamabad has been under continuous U.S. and
international pressure to terminate the infiltration of insurgents across the Kashmiri Line of
Control (LOC). Such pressure reportedly elicited a January 2002 promise from President
Musharraf to then-U.S. Deputy Secretary of State Armitage that all such movements would
cease. During a June 2002 visit to Islamabad, Secretary Armitage reportedly received
another pledge from the Pakistani president, this time an assurance that any existing terrorist
camps in Pakistani Kashmir would be closed. Musharraf has pledged to India that he will
not permit any territory under Pakistan’s control to be used to support terrorism, and he
insists that his government is doing everything possible to stop infiltration and shut down
militant base camps in Pakistani-controlled territory. Critics contend, however, that
Islamabad continues to actively support separatist insurgents as a means both to maintain
strategically the domestic backing of Islamists who view the Kashmir issue as fundamental
to the Pakistani national idea, and to disrupt tactically the state government in Indian
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Kashmir in seeking to erode New Delhi’s legitimacy there. Positive indications growing
from the latest Pakistan-India peace initiative include a cease-fire at the LOC that has held
since November 2003 and statements from Indian officials indicating that rates of militant
infiltration were down significantly. However, in 2005 and early 2006, Indian leaders have
renewed their complaints that Islamabad has taken insufficient action to eradicate the
remaining “infrastructure of terrorism” on Pakistani-controlled territory.
Domestic Terrorism. Pakistan is known to be a base for numerous indigenous
terrorist organizations, and the country continues to suffer from terrorism at home, especially
that targeting the country’s Shia minority. Until a February 2006 car bombing at the U.S.
consulate in Karachi, recent attacks on Western targets had been rare, but 2002 saw several
acts of lethal anti-Western terrorism, including the kidnaping and murder of reporter Daniel
Pearl, a grenade attack on a Protestant church that killed a U.S. Embassy employee, and two
car bomb attacks on targets, including one on the same U.S. consulate, which killed a total
of 29 people, among them 11 French military technicians. These attacks, widely viewed as
expressions of militants’ anger with the Musharraf regime for its cooperation with the United
States, were linked to Al Qaeda, as well as to indigenous militant groups. During 2003-
present, the worst domestic terrorism was directed against Pakistan’s Shia minority and
included suicide bomb attacks that killed a total of some 60 people in May 2005 and
February 2006. Indications are that the indigenous Lashkar-e-Jhangvi (LJ) Sunni terrorist
group has been responsible for the most deadly sectarian violence. Two attempts to kill
Musharraf in December 2003 and failed efforts to assassinate other top Pakistani officials
in mid-2004 were said to be linked to LJ and other Al Qaeda-allied groups, and illuminated
the grave danger presented by religious extremists.
Pakistan-U.S. Security Cooperation. In June 2004, President Bush designated
Pakistan as a major non-NATO ally of the United States. The close U.S.- Pakistan security
ties of the cold war era — which came to a near halt after the 1990 aid cutoff — have been
in the process of restoration as a result of Pakistan’s role in U.S.-led anti-terrorism campaign.
In 2002, the United States began allowing commercial sales that enabled Pakistan to
refurbish at least part of its fleet of American-made F-16 fighter aircraft. In March 2005, the
United States announced that it would resume sales of F-16 fighters to Pakistan after a 16-
year hiatus. Reports indicate that up to 55 new and 25 used F-16s may be offered in 2006.
Major U.S. military grants and proposed sales to Pakistan since 2001 have included six C-
130 military transport aircraft ($75 million grant); six Aerostat surveillance radars ($155
million sale); 12 radars and 40 Bell transport helicopters ($300 million sale); military radio
systems ($78 million sale); eight P-3C aircraft, six Phalanx guns, and 2,000 TOW missiles
(proposed sales worth up to $1.2 billion); the proposed sale of 300 Sidewinder air-to-air
missiles and 60 Harpoon anti-ship missiles (worth $226 million); and 115 self-propelled
howitzers ($56 million sale). The Pentagon reports Foreign Military Sales agreements with
Pakistan worth $343 million in FY2003-FY2004. The United States has undertaken to train
and equip new Pakistan Army Air Assault units that can move quickly to find and target
terrorist elements. There has been a direct U.S. role in training the security detail of the
Pakistani president, help to fund a 650-officer Diplomatic Security Unit, and assistance with
numerous programs designed to improve the quality of Pakistan’s internal police forces
through the provision of equipment and training. A revived high-level U.S.-Pakistan
Defense Consultative Group (DCG) — moribund since 1997 — sits for high-level
discussions on military cooperation, security assistance, and anti-terrorism. (See also CRS
Report RS22148, Combat Aircraft Sales to South Asia: Potential Implications.)
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Nuclear Weapons and Missile Proliferation. Many policy analysts consider the
apparent arms race between India and Pakistan as posing perhaps the most likely prospect
for the future use of nuclear weapons by states. In May 1998, India conducted unannounced
nuclear tests, breaking a 24-year, self-imposed moratorium on such testing. Despite U.S. and
world efforts to dissuade it, Pakistan quickly followed. The tests created a global storm of
criticism, and represented a serious setback to two decades of U.S. nuclear nonproliferation
efforts in South Asia. Pakistan currently is believed to have enough fissile material, mainly
enriched uranium, for 55-90 nuclear weapons; India, with a program focused on plutonium,
may be capable of building a similar number. Both countries have aircraft capable of
delivering nuclear bombs. Pakistan’s military has inducted short- and medium-range
ballistic missiles (allegedly acquired from China and North Korea), while India possesses
short- and intermediate-range missiles. All are assumed to be capable of delivering nuclear
warheads over significant distances. In 2000, Pakistan placed its nuclear forces under the
control of a National Command Authority led by the president.
Press reports in late 2002 suggested that Pakistan assisted Pyongyang’s covert nuclear
weapons program by providing North Korea with uranium enrichment materials and
technologies beginning in the mid-1990s and as recently as July 2002. Islamabad rejected
such reports as “baseless,” and Secretary of State Powell was assured that no such transfers
were occurring. If such assistance is confirmed by President Bush, all non-humanitarian U.S.
aid to Pakistan may be suspended, although the President has the authority to waive any
sanctions that he determines would jeopardize U.S. national security. In March 2003, the
Administration determined that the relevant facts “do not warrant imposition of sanctions
under applicable U.S. laws.” Press reports during 2003 suggested that both Iran and Libya
benefitted from Pakistani nuclear assistance. Islamabad denied any nuclear cooperation with
Tehran or Tripoli, although it conceded in December 2003 that certain senior scientists were
under investigation for possible independent proliferation activities.
The investigation led to the February 2004 “public humiliation” of metallurgist Abdul
Qadeer Khan, known as the founder of Pakistan’s nuclear weapons program and national
hero, when he confessed to involvement in a proliferation network. Khan and at least seven
associates are said to have sold crucial nuclear weapons technology and uranium-enrichment
materials to North Korea, Iran, and Libya. President Musharraf, citing Khan’s contributions
to his nation, issued a pardon that was later called conditional. The United States has been
assured that the Islamabad government had no knowledge of such activities and indicated
that the decision to pardon is an internal Pakistani matter. While Musharraf has promised
President Bush that he will share all information learned about Khan’s proliferation network,
Pakistan refuses to allow any direct access to Khan by U.S. or U.N. investigators. (See CRS
Report RL32115, Missile Proliferation and the Strategic Balance in South Asia; CRS Report
RL32745, Pakistan’s Nuclear Proliferation Activities and the Recommendations of the 9/11
Commission; and CRS Report RS21237, India and Pakistan Nuclear Weapons.)
U.S. Nonproliferation Efforts. In May 1998, following the South Asian nuclear
tests, President Clinton imposed full restrictions on all non-humanitarian aid to both Pakistan
and India as mandated under Section 102 of the Arms Export Control Act. However,
Congress and the President acted almost immediately to lift certain aid restrictions and, after
October 2001, all remaining nuclear-related sanctions on Pakistan (and India) were removed.
The United States continues to urge Pakistan and India to join the Nuclear Nonproliferation
Treaty (NPT) as non-nuclear weapon states and provides no official recognition of their
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nuclear weapons capabilities. During the latter years of the Clinton administration, the
United States set forth nonproliferation “benchmarks” for Pakistan and India, including
halting further nuclear testing and signing and ratifying the Comprehensive Test Ban Treaty
(CTBT); halting fissile material production and pursuing Fissile Material Control Treaty
negotiations; refraining from deploying nuclear weapons and testing ballistic missiles; and
restricting any and all exportation of nuclear materials or technologies. The results of U.S.
efforts were mixed, at best, and neither Pakistan nor India are signatories to the CTBT or
NPT. The Bush Administration makes no reference to the benchmark framework. Concerns
about onward proliferation, fears that Pakistan could become destabilized by the U.S.-led
counterterrorism efforts in Afghanistan, and confusion over the issue of political succession
in Islamabad have heightened U.S. attention to weapons proliferation in South Asia. (See
CRS Report RL31559, Proliferation Control Regimes and CRS Report RL31589, Nuclear
Threat Reduction Measures for India and Pakistan.)
Pakistan-India Tensions and the Kashmir Issue. Relations between Pakistan
and India remain deadlocked on the issue of Kashmiri sovereignty, and a separatist rebellion
has been underway in the region since 1989. Tensions were extremely high in the wake of
the Kargil conflict of 1999, when an incursion by Pakistani soldiers led to a bloody six-week-
long battle. Throughout 2000 and 2001, cross-border firing and shelling caused scores of
both military and civilian deaths. A 2001 Pakistan-India summit meeting failed to produce
a joint statement, reportedly due to pressure from hardliners on both sides. Major stumbling
blocks were India’s refusal to acknowledge the “centrality of Kashmir” to future talks and
Pakistan’s objection to references to “cross-border terrorism.” Secretary of State Powell
visited South Asia in an effort to ease escalating tensions over Kashmir, but an October 2001
bombing at the Jammu and Kashmir state assembly building was followed by a December
assault on the Indian Parliament in New Delhi (both incidents were blamed on Pakistan-
based terrorist groups). The Indian government mobilized some 700,000 troops along the
Pakistan-India frontier and threatened war unless Islamabad ended all cross-border
infiltration of Islamic militants. Under significant international diplomatic pressure and the
threat of India’s use of force, President Musharraf in January 2002 vowed to end the presence
of terrorist entities on Pakistani soil, and he outlawed five militant groups, including those
most often named in attacks in India: Lashkar-e-Taiba and Jaish-e-Mohammed.
Despite the Pakistani pledge, infiltrations into Indian-held Kashmir continued, and a
May 2002 terrorist attack on an Indian army base at Kaluchak killed 34, most of them women
and children. This event again brought Pakistan and India to the brink of full-scale war, and
caused Islamabad to recall army troops from patrol operations along the Pakistan-
Afghanistan border. Intensive international diplomatic missions to South Asia reduced
tensions during the summer of 2002 and appear to have prevented the outbreak of war.
Numerous top U.S. officials were involved in this effort and continued strenuously to urge
the two countries to renew bilateral dialogue. A “hand of friendship” offer to Pakistan by
the Indian prime minister in April 2003 led to the restoration of full diplomatic relations, but
surging separatist violence that summer contributed to an exchange of sharp rhetoric between
Pakistani and Indian leaders at the United Nations, casting doubt on the peace effort.
However, a new confidence-building initiative got Pakistan and India back on a positive
track and a November 2003 cease-fire was initiated after a proposal by Pakistani Prime
Minister Jamali. President Musharraf also has suggested that Pakistan might be willing to
“set aside” its long-standing demand for a plebiscite in Kashmir, a proposal welcomed by the
United States, but called a “disastrous shift” in policy by Pakistani opposition parties.
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Although militant infiltration did not end, New Delhi acknowledged that it was
significantly decreased and, combined with other confidence-building measures, relations
were sufficiently improved that the Indian prime minister attended a January 2004 summit
meeting of the South Asian Association for Regional Cooperation (SAARC) in Islamabad.
There Pakistan and India issued a joint “Islamabad Declaration” calling for a renewed
“composite dialogue” to bring about “peaceful settlement of all bilateral issues, including
Jammu and Kashmir, to the satisfaction of both sides.” A major confidence-building
development came in April 2005, when a new bus service was launched linking
Muzaffarabad in Pakistani Kashmir and Srinagar in Indian Kashmir, and a summit meeting
produced an agreement to address the Kashmir issue “in a forward looking manner for a final
settlement.” Still, many Kashmiris reject any settlement process that excludes them.
Pakistan-based and Kashmiri militant groups express determination to continue fighting in
Kashmir despite the Pakistan-India dialogue. Deadly attacks by separatist militants are
ongoing and demonstrate that the issue remains dangerous and unresolved.
Islamization and Anti-American Sentiment
An unexpected outcome of Pakistan’s 2002 elections saw the Muttahida Majlis-e-Amal
(MMA or United Action Front), a coalition of six Islamic parties, win 68 seats in the
National Assembly — about 20% of the total. It also controls the provincial assembly in the
North West Frontier Province (NWFP) and leads a coalition in the Baluchistan assembly.
These Pashtun-majority western provinces border Afghanistan, where U.S.-led
counterterrorism operations are ongoing. The result led to concerns that a shift in Pakistani
policies might be in the offing, perhaps even a “Talibanization” of western border regions.
In June 2003, the NWFP assembly passed a Shariat (Islamic law) bill in the provincial
assembly. Two years later, the same assembly passed a “Hasba” (accountability) bill that
many fear could create a parallel Islamic legal body. Such developments alarm Pakistan’s
moderates and President Musharraf has decried any attempts to “Talibanize” regions of
Pakistan. Islamists are notable for expressions of anti-American sentiment, at times calling
for “jihad” against the existential threat to Pakistani sovereignty they believe the alliance
with Washington entails. Most analysts contend that two December 2003 attempts to
assassinate President Musharraf were carried out by Islamic militants angered by Pakistan’s
post-September 2001 policy shift. Some observers identify a causal link between the poor
state of Pakistan’s primary education system and the persistence of xenophobia and religious
extremism in that country (see CRS Report RS22009, Education Reform in Pakistan).
Anti-American sentiment is not limited to Islamic groups, however. In January 2004
testimony before a Senate panel, a senior U.S. expert opined: “Pakistan is probably the most
anti-American country in the world right now, ranging from the radical Islamists on one side
to the liberals and Westernized elites on the other side.” A July 2005 Pew Center opinion
poll found 51% of Pakistanis expressing confidence in Al Qaeda founder Osama bin Laden
to “do the right thing in world affairs” and, in an October 2005 Time magazine interview,
President Musharraf conceded that “the man on the street [in Pakistan] does not have a good
opinion of the United States.” A Pew poll taken months before the 10/05 earthquake found
only 23% of Pakistanis expressing a favorable view of the United States, the lowest
percentage for any country surveyed. Yet that percentage doubled to 46% in an ACNielson
poll taken after major U.S. disaster relief efforts in earthquake-affected areas, with the great
majority of Pakistani indicating that their perceptions had been influenced by seeing such
efforts. However, a January 2006 missile attack on Pakistani homes near the Afghan border
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killed several civilians and was blamed on U.S. forces, perhaps renewing animosity toward
the United States among some segments of the Pakistani populace. Also in early 2006,
Pakistani cities have seen major public demonstrations against the publication in European
newspapers of cartoons deemed offensive to Muslims. These protests, which have been
violent at times, included strong anti-U.S. and anti-Musharraf components, suggesting that
Islamist organizers are using the issue to forward their own political ends.
Democratization and Human Rights
Democracy and Governance. There had been hopes that the October 2002 national
elections would reverse Pakistan’s historic trend toward unstable governance and military
interference in democratic institutions. Such hopes have been eroded by ensuing
developments, including President Musharraf’s imposition of major constitutional changes
and his retention of the position of army chief. International and Pakistani human rights
groups continue to issue reports critical of Islamabad’s military-dominated government. In
2005, and for the sixth straight year, the often-cited Freedom House rated Pakistan as “not
free” in the areas of political rights and civil liberties. While praising Pakistan’s electoral
exercises as moves in the right direction, the United States has expressed concern that
seemingly nondemocratic developments may make the realization of true democracy in
Pakistan more elusive, and U.S. officials continue to press Pakistani leaders on this issue.
Gen. Musharraf’s April 2002 assumption of the presidency ostensibly was legitimized
by a controversial referendum marked by evidence of fraud. In August 2002, Musharraf
announced sweeping constitutional changes that bolster the president’s powers, including
provisions for presidential dissolution of the National Assembly. The United States
expressed concerns that the changes “could make it more difficult to build strong, democratic
institutions in Pakistan.” The 2002 elections nominally fulfilled Musharraf’s promise to
restore the National Assembly that was dissolved in the wake of his extra-constitutional
seizure of power. The pro-military Pakistan Muslim League-Quaid-e-Azam (PML-Q) won
a plurality of seats, while a coalition of Islamist parties made a surprisingly strong showing.
The civilian government was hamstrung for more than a year by fractious debate over the
legitimacy of constitutional changes and by Musharraf’s continued status as army chief and
president. A surprise December 2003 agreement between Musharraf and the Islamist
opposition ended the deadlock by bringing the constitutional changes before Parliament and
by eliciting a promise from Musharraf to resign his military commission before 2005. Non-
Islamist opposition parties unified under the Alliance for the Restoration of Democracy
(ARD) accused the MMA of betrayal and insisted that the new arrangement merely
institutionalized military rule in Pakistan, especially after the April 2004 establishment of
a new National Security Council.
Other apparent reversals for Pakistani democratization came in 2004, including the
sentencing of ARD leader Javed Hashmi to 23 years in prison for sedition, mutiny, and
forgery, and the “forced” resignation of Prime Minister Jamali for what numerous analysts
called his insufficient deference to President Musharraf. Musharraf “shuffled” prime
ministers to seat his close ally, Finance Minister Shaukat Aziz. Aziz is seen to be an able
financial manager and technocrat favored by the military, but he has no political base in
Pakistan. Moreover, in the final month of 2004 Musharraf chose to continue his role as army
chief beyond the stated deadline. The United States indicates that it expects Pakistan’s
scheduled 2007 general elections to be free and fair throughout the entire process. In July
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2005, the Senate Appropriations Committee expressed concern with “the slow pace of the
democratic development of Pakistan” (S.Rept. 109-96). Pakistan’s August-October 2005
municipal elections saw major gains for candidates favored by the PML-Q and notable
reversals for Islamists, but were also marked by widespread accusations of rigging. (See
CRS Report RL32615, Pakistan’s Domestic Political Developments.)
Human Rights Problems. The U.S. State Department Country Report on Human
Rights Practices 2004 determined that the Pakistani government’s record on human rights
again “remained poor; although there were some improvements in a few areas, serious
problems remained.” Along with concerns about anti-democratic practices, the report lists
“severe” corruption, extrajudicial killings, lack of judicial independence, political violence,
terrorism, and “extremely poor” prison conditions among the serious problems. Police have
abused and raped citizens with apparent impunity. Improvement in a few areas was noted,
however, particularly with press freedoms and the punishment of some security officials who
were found guilty of abuses. The Human Rights Commission of Pakistan, Amnesty
International, and Human Rights Watch have issued reports critical of Pakistan’s lack of
political freedoms and of the country’s perceived abuses of the rights of women and
minorities. Discrimination against women is widespread, and traditional constraints —
cultural, legal, and spousal — have kept women in a subordinate position in society. “Honor
killings” continue to occur throughout the country. The adult literacy rate for men in
Pakistan is 60%, while less than one-third of women can read and write. The State
Department’s International Religious Freedom Report 2005 found that in practice the
Islamabad government imposes limits on the freedom of religion in Pakistan. The report
noted “some steps to improve the treatment of religious minorities,” but indicated that
“serious problems remained.” However, the State Department rejected a U.S. Commission
on International Religious Freedom recommendation that Pakistan be designated a Country
of Particular Concern. A 2005 report from that Commission claimed that, “The response of
the government of Pakistan to persistent and religiously motivated violence in Pakistan
continues to be inadequate.” In June 2005, a State Department report on trafficking in
persons said that “Pakistan does not fully comply with the minimum standards for the
elimination of trafficking; however, it is making significant efforts to do so,” and it removed
Pakistan from the “Tier 2 Watch List” in recognition of such efforts.
Narcotics
Pakistan is a major transit country for opiates that are grown and processed in
Afghanistan then distributed worldwide by Pakistan-based traffickers. The State Department
indicates that Pakistan’s cooperation on drug control with the United States “remains
strong,” and the Islamabad government has made impressive strides in eradicating
indigenous opium poppy cultivation. However, opium production spiked in post-Taliban
Afghanistan (which is now said to supply up to 90% of the world’s heroin) and, in September
2005, President Bush again identified Pakistan as being among the world’s “major illicit drug
producing or drug-transit countries.” Elements of Pakistan’s major intelligence agency are
suspected of involvement in drug trafficking; in March 2003, a former U.S. Ambassador to
Pakistan told a House panel that their role in the heroin trade from 1997-2003 was
“substantial.” Some reports indicate that profits from drug sales are financing the activities
of Islamic extremists in Pakistan, Afghanistan, and Kashmir. U.S. counter-narcotics
programs aim to reduce the flow of opiates though Pakistan, eliminate Pakistan as a source
of such opiates, and reduce the demand for illegal drugs within the country. Pakistan’s own
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counter-narcotics efforts are hampered by lack of full government commitment, scarcity of
funds, poor infrastructure, and “acute” corruption. Since 2002, the State Department’s
Bureau of International Narcotics and Law Enforcement Affairs has supported Pakistan’s
Border Security Project by training border forces, providing vehicles and surveillance and
communications equipment, transferring helicopters and fixed-wing aircraft to the Interior
Ministry’s Air Wing, and road-building in western tribal areas.
Economic Issues
Overview. Pakistan is a poor country with great extremes in the distribution of wealth,
but the national economy has gathered significant positive momentum in recent years. Per
capita GDP is $708 (about $2,400 when accounting for purchasing power parity). Severe
human losses and property damage from an October 2005 earthquake in northern Pakistan
are likely to have limited economic impact, given a large influx of foreign aid and the
stimulus provided by reconstruction efforts. The long-term economic outlook for Pakistan
is much improved since 2001, but remains clouded in a country highly dependent on foreign
lending and the importation of basic commodities. In the short-run, substantial fiscal deficits
and the still urgent dependency on external aid donations counterbalance a major overhaul
of the tax collection system and what have been notable gains in the Karachi Stock
Exchange, the world’s best performer in 2002, and up 65% in 2003 and 40% in 2004.
Output from both the industrial and service sectors has grown substantially since 2002, but
the agricultural sector has lagged (in part due to droughts), slowing overall growth.
Agricultural labor accounts for nearly half of the country’s work force. Pakistan’s real GDP
for the fiscal year ending June 2005 grew by an impressive 8.4%, driven by a strong
manufacturing sector and greater than expected agricultural expansion. This was the best
overall growth rate in two decades and up from 6.4% the previous year. Expanding textile
production and the government’s pro-growth measures have most analysts foreseeing solid
growth ahead, with predictions at or above 6% for the next two years.
Pakistan stabilized its external debt at about $33 billion by mid-2003, but rose to nearly
$38 billion in 2005. Still, such debt is only about one-third of GDP today, down from more
than one-half in 2000. The country’s total liquid reserves reached a record $13 billion by
mid-2005, an all-time high and an increase of more than 400% since October 1999. Foreign
remittances in 2003 exceeded $4 billion, nearly quadrupling the amount in 2001. Inflationary
pressures have grown, at least partly due to increased oil prices, resulting in a year-on-year
wholesale rate of 8.5% in December 2005, but may ease in 2006. Defense spending and
interest on public debt together consume two-thirds of total revenues, thus squeezing out
development expenditure. Pakistan’s resources and comparatively well-developed
entrepreneurial skills may hold promise for more rapid economic growth and development
in coming years. This is particularly true for Pakistan’s textile industry, which accounts for
60% of Pakistan’s exports. Analysts point to the pressing need to further broaden the
country’s tax base in order to provide increased revenue for investment in improved
infrastructure, health, and education, all prerequisites for economic development.
Attempts at economic reform historically have floundered due to political instability.
The Musharraf government has had notable successes in effecting macroeconomic reform,
although efforts to reduce poverty have made little headway. Rewards for participation in
the post-September 2001 anti-terror coalition eased somewhat Pakistan’s severe national debt
situation, with many countries, including the United States, boosting bilateral assistance
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efforts and large amounts of external aid flowing into the country. In January 2005, a top
International Monetary Fund official congratulated Pakistan for its “successful
implementation” of reforms that led to “impressive turnarounds” in macroeconomic trends.
One month later, the World Bank president praised Pakistan’s “terrific” economic progress,
but emphasized that Pakistan “has a long way to go in terms of achieving its human
development goals.” In April 2005, an Asian Development Bank report noted recent
improvement in the Pakistani economy, but identified rising inflation, a large trade deficit,
and a balance of payments deficit as majors areas of concern.
Trade and Investment. The United States is by far Pakistan’s leading export market,
accounting for nearly one-quarter of the total. Pakistan’s primary exports are cotton, textiles
and apparel, rice, and leather products. During 2005, total U.S. imports from Pakistan were
worth $3.25 billion (up 13% over 2004). About two-thirds of this value came from the
purchase of cotton apparel and textiles. U.S. exports to Pakistan during 2005 were worth
$1.25 billion (down 31% from 2004), led by fertilizers and cotton fiber (the decline is a result
of completed delivery of civilian aircraft). According to the 2005 report of the U.S. Trade
Representative (USTR), Pakistan has made progress in reducing import tariff schedules,
though a number of trade barriers remain. Progress also has come in the area of intellectual
property rights protection: The International Intellectual Property Alliance estimated trade
losses of $96 million due to copyright piracy in Pakistan in 2005, down from $148 million
in 2004. Book piracy accounts for more than half of the 2005 losses, however, and remains
a serious concern. Pakistan also has been a world leader in the pirating of music CDs and
has appeared on the USTR’s “Special 301” Watch List for 16 consecutive years (in 2004,
continuing violations caused the USTR to move Pakistan to the Priority Watch List). The
State Bank of Pakistan reports a steady increase in foreign investment in the country since
2001, with a total exceeding $1 billion for the year ending June 2005. More than one-quarter
of this amount came from the United States. The Heritage Foundation’s 2006 Index of
Economic Freedom — which may overemphasize the value of absolute growth and
downplay broader quality-of-life measurements — noted significant improvements, but again
rated Pakistan’s economy as being “mostly unfree,” identifying restrictive trade policies, a
heavy fiscal burden, weak property ownership protections, and a high level of “black market
activity.” Corruption is a serious problem: in 2005, Berlin-based Transparency International
placed Pakistan 144th out of 158 countries in its annual ranking of world corruption levels.
U.S. Aid and Congressional Action
U.S. Assistance. Total U.S. economic and military assistance (loans and grants) to
Pakistan from 1947 through 2005 was more than $15 billion. In June 2003, President Bush
vowed to work with Congress on establishing a five-year, $3 billion aid package for Pakistan.
Annual installments of $600 million each, split evenly between military and economic aid,
began in FY2005. The Foreign Operations FY2005 Appropriations bill (P.L. 108-447)
established a new base program of $300 million for military assistance for Pakistan. When
additional funds for development assistance, law enforcement, and other programs are
included, the aid allocation for FY2005 was about $688 million (see Table 1). Congress also
has appropriated billions of dollars to reimburse Pakistan for its support of U.S.-led
counterterrorism operations. From FY2002-FY2006, annual supplemental appropriations
and requests have included a total of $6.16 billion in additional defense spending to be used
for coalition support payments to Pakistan and other cooperating nations. The vast majority
of this funding has gone or will go to Pakistan: Pentagon documents indicate Pakistan
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received coalition support funding of $2.3 billion for the period FY2002-FY2004 — an
amount roughly equal to one-fifth of Pakistan’s total military expenditures during that period
— and a report of the House Armed Services Committee (H.Rept. 109-89) said the Secretary
of Defense expected to disburse to Pakistan the entire FY2005 allocation of $1.22 billion.
Proliferation-Related Legislation. Through a series of legislative measures,
Congress incrementally lifted sanctions on Pakistan resulting from its nuclear weapons
proliferation activities.1 After the September 2001 terrorist attacks on the United States,
policymakers searched for new means of providing assistance to Pakistan. President Bush’s
issuance of a final determination that month removed remaining sanctions on Pakistan (and
India) resulting from the 1998 nuclear tests, finding that restrictions were not in U.S. national
security interests. Some Members of the 108th Congress urged reinstatement of proliferation-
related sanctions in response to evidence of Pakistani assistance to third-party nuclear
weapons programs. However, the Nuclear Black-Market Elimination Act (H.R. 4965) did
not see floor action. Pending legislation in the 109th Congress includes H.R. 1553, which
would prohibit the provision of military equipment to Pakistan unless the President can
certify that Pakistan has verifiably halted all proliferation activities and is fully sharing with
the United States all information relevant to the A.Q. Khan proliferation network.
Coup-Related Legislation. Pakistan’s October 1999 military coup triggered U.S.
aid restrictions under Section 508 of the annual Foreign Assistance appropriations act. Post-
September 2001 circumstances saw Congress take action on such restrictions. P.L. 107-57
(October 2001) waived coup-related sanctions on Pakistan through FY2002 and granted
presidential authority to waive them through FY2003. A November 2003 emergency
supplemental appropriations act (P.L. 108-106) extended the President’s waiver authority
through FY2004. The Foreign Operations FY2006 appropriations bill (P.L. 109-102)
extended it through FY2006. President Bush has exercised this waiver authority annually.
Other Legislation. In the 108th Congress, conference managers making foreign
operations appropriations directed the Secretary of State to report to Congress on Pakistan’s
education reform strategy and the U.S. strategy to provide relevant assistance (H.Rept. 108-
792; see CRS Report RS22009, Education Reform in Pakistan). Also in the 108th Congress,
the House-passed Foreign Relations Authorization Act, FY2004-2005 would have required
the President to report to Congress on Pakistani actions related to terrorism and WMD
proliferation. The Senate did not take action on this bill. The House-passed version of the
Intelligence Authorization Act, FY2005 contained similar reporting requirements; this
section was removed in the Senate. In the 109th Congress, the pending Targeting Terrorists
More Effectively Act of 2005 (S. 12) includes Pakistan-specific language.
1 The Agricultural Export Relief Act of 1998 (P.L. 105-194) allowed U.S. wheat sales to Pakistan
after July 1998. The India-Pakistan Relief Act of 1998 (in P.L. 105-277) authorized a one-year
sanctions waiver exercised by President Clinton in November 1998. The Department of Defense
Appropriations Act, 2000 (P.L. 106-79) gave the President permanent authority after October 1999
to waive nuclear-test-related sanctions applied against Pakistan and India. On October 27, 1999,
President Clinton waived economic sanctions on India (Pakistan remained under sanctions as a result
of the October 1999 coup). The Foreign Operations Export Financing and Related Appropriations
Agencies Act, 2001 (P.L. 106-429; Section 597) provided an exception under which Pakistan could
be provided U.S. foreign assistance funding for basic education programs. (See also CRS Report
RS20995, India and Pakistan: Current U.S. Economic Sanctions.)
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9/11 Commission Recommendations. The 9/11 Commission Report (July 2004)
identified the government of President Musharraf as the best hope for stability in Pakistan
and Afghanistan, and it recommended that the United States make a long-term commitment
to provide comprehensive support for Islamabad so long as Pakistan itself is committed to
combating extremism and to a policy of “enlightened moderation.” In the Intelligence
Reform and Terrorism Prevention Act of 2004 (P.L. 108-458), Congress broadly endorsed
this recommendation by calling for U.S. aid to Pakistan to be sustained at a minimum of
FY2005 levels and requiring the President to report to Congress a description of long-term
U.S. strategy to engage with and support Pakistan. A November 2005 follow-on report by
Commissioners gave a “C” grade to U.S. efforts to support Pakistan’s anti-extremism
policies and warned that the country “remains a sanctuary and training ground for terrorists.”
Table 1. U.S. Assistance to Pakistan, FY2001-FY2007
(in millions of dollars)
Program or
FY2001
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
Account
Actual
Actual
Actual
Actual
Actual
Estimate
Request
CSH
—
5.0
15.6
25.6
21.0
32.2
21.7
DA
—
10.0
34.5
49.4
29.0
40.6
29.0
ERMA
—
25.0
—
—
—
—
—
ESF
—
624.5
188.0d
200.0d
297.6
337.1
350.0
FMF
—
75.0
224.5
74.6
298.8e
297.0
300.0
IMET
—
0.9
1.0
1.4
1.9
2.0
2.1
INCLE
3.5
90.5c
31.0
31.5
32.1e
37.6
25.5
NADRa
—
10.1
—
4.9
8.0
7.8
10.3
PKO
—
220.0
—
—
—
—
—
Subtotal
$3.5
$1,061.0
$494.6
$387.4
$688.4
$754.3f
$738.6
P.L.480 Title Ib
0.5
10.0
9.0
6.0
10.2
20.0
—
P.L.480 Title IIb
1.9
5.1
9.7
8.4
5.8
6.7
—
Section 416(b)b
85.1
75.7
—
9.6
2.0
—
—
Total
$91.0
$1,151.8
$513.3
$411.4
$706.4
$781.0f
$738.6
Sources: U.S. Departments of State and Agriculture; U.S. Agency for International Development.
Abbreviations:
CSH:
Child Survival and Health
NADR:
Nonproliferation, Anti-Terrorism,
DA:
Development Assistance
Demining, and Related
ERMA:
Emergency Refugee and Migration Assistance
PKO:
Peacekeeping Operations
ESF:
Economic Support Fund
P.L.480 Title I:
Trade and Development Assistance
FMF:
Foreign Military Financing
food aid (loans)
IMET:
International Military Education and Training
P.L.480 Title II:
Emergency and Private Assistance food
INCLE:
International Narcotics Control and Law
aid (grants)
Enforcement (includes border security)
Section
416(b):
The Agricultural Act of 1949, as
amended (surplus donations)
Notes:
a. The great majority of NADR funds requested for Pakistan are for anti-terrorism assistance.
b. Food aid amounts do not include freight costs.
c. Included $73 million for border security projects that continued in FY2003.
d. Congress authorized Pakistan to use the FY2003 ESF allocation to cancel $988 million and the FY2004 allocation to
cancel $495 million in concessional debt to the U.S. government.
e. Included Emergency Supplemental Appropriations Act, 2005 (P.L. 109-13) funding of $150 million in FMF and $4
million in counter-drug funding for Pakistan.
f. The FY2006 estimate includes the Administration’s February 2006 supplemental request for additional CSH, DA, and
ESF, but does not include International Disaster and Famine Assistance funds committed for earthquake relief.
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