Pakistan to Receive Refund on Disputed Purchase of U.S. Jets

An eight-year dispute with the United States over the purchase of 28 fighter jets that Pakistan bought but never received has been resolved.

The F-16 aircraft, bought to bolster defenses against archrival India, were denied Pakistan because of the Pressler Amendment, which bars military sales to countries that have nuclear programs.

Prime Minister Nawaz Sharif told a news conference that President Clinton telephoned him Friday to address “a long-standing and persistent irritant in our bilateral relations with the United States.”

He said Clinton, “who, to his credit, acknowledged that it was not fair to keep both the money and the planes,” had acted in a “statesmanlike manner” by working out the terms of a settlement as he promised during Sharif’s visit to Washington last month.

Under the terms of the agreement, Pakistan will receive $467 million, of which $327 million will be paid by the end of the month. The balance of $140 million will be delivered over the next two years in the form of wheat and other exports, Sharif said.

The figures include a deduction to the United States for service charges, Sharif said, adding that he did not know if the cash will be used to service Pakistan’s foreign debt or buy alternative military aircraft.

The F-16 issue has been a headache for Pakistan, which is grappling to repay millions of dollars on $32 billion of foreign debt amid a hard currency drought caused by Western economic sanctions and the suspension of International Monetary Fund programs.

Pakistan is said by bankers to be behind on more than $1.5 billion of debt payments and does not expect to get any fresh IMF inflows until February at the earliest.

Its cash reserves are about $450 million, barely a month’s worth of imports. The government hopes that an IMF agreement will pave the way for a rescheduling of some of its debt by creditors in Paris and London early next year.

Pakistan and the IMF agreed on a framework last month to resume IMF loans that were held up because of Western sanctions, but no disbursements are expected until February. The punishing sanctions were imposed in May after Pakistan tested nuclear devices.