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The Reality of US Aid to Pakistan

US assistance: Differing perceptions
By Ishrat Husain
Published: May 19, 2011

The writer is dean and director of IBA, Karachi and a former governor of the State Bank of Pakistan ishrat.husain@tribune.com.pk

Bilateral official economic assistance from developed to developing countries has always been loaded with political and foreign policy overtones of donors. In Pakistan, US economic aid has become a highly contentious issue due to the widely differing perceptions about its motivation and consequences among the donor and recipient countries. The debate about the future of this assistance has been reignited after Osama bin Laden’s capture by the US.

The popular narrative in the US as articulated by the media, a few think-tanks and congressmen rests on the premise that Pakistan is almost at the brink of bankruptcy and it is the US assistance that is providing the lifeline for sustenance. The penalty for deviant behaviour on the part of Pakistan should be severe and aid should be suspended, curtailed or withdrawn as it is only through these punitive measures that Pakistan would fall in line. Many other Americans believe that helping Pakistan is simply not worth the time ‘or money’ and that by doing so their hard-earned tax money is going down the drain. Given the high domestic unemployment rate and growing fiscal deficit it is better to stop the aid to Pakistan. A more benign variant prevailing among some US politicians and scholars is that Pakistan has been let down too many times by the US in the past and the best way to demonstrate our long term strategic commitment to Pakistan is to help the country in its pursuit of economic development. Both these approaches — stick or carrot — are based on the tacit assumption that the quantum of US assistance is so significant that it would be able to invoke the alteration in Pakistan’s behaviour. The fact of the matter is that — US aid does not help the government’s precarious fiscal situation in any meaningful way as only 12-15 per cent of the total amount is channelled for budgetary support.

In Pakistan also, there are several viewpoints about the efficacy and impact of US aid. A large number of Pakistanis are deeply resentful that the US has been able to obtain a disproportionate leverage on Pakistan’s policy space because of this paltry sum. The sovereign autonomy and dignity has been sacrificed and the country has been relegated to the status of a client state or ‘rent-a-state’. The long-term stability of the country is at risk because of this painful obsequiousness and submissive alliance.

Another group believes that by entangling in the war on terror, Pakistan has suffered enormous losses financially, economically, socially and psychologically and the compensation being paid by the US for this colossal damage amounts to almost nothing. It is estimated that during 2000-10, the US spent Rs2,000 billion in Afghanistan, Iraq and on beefing up domestic security. Pakistan’s share of this amount was Rs20 billion or 0.1 per cent, while the country has lost 35,000 civilians and soldiers, in addition to suffering disruption and dislocation of the economy, displacement of population, a several-fold increase in expenditure on military operations and internal security, almost virtual boycott of Pakistan by external visitors and a state of perpetual fear, etc. Out of the amount received, Rs8 billion under the Coalition Support Fund was simply reimbursement of the expenditures incurred on logistical support and supplies to Nato and US troops. A third group believes that despite the late Mr Holbrooke and Secretary Clinton’s best efforts, the divergence between the development priorities of the government of Pakistan and US aid remains wide. This is borne out by the report of the Centre for Global Development — the leading US think-tank on development issues (Note: I must disclose that I was a member of the Study Group that produced this Report). In assessing US assistance to Pakistan, the report notes that “the integration of development, diplomacy and defence has muddled the development mission and left the programme without a clear, focused mandate. The Kerry-Lugar legislation lists no fewer than 11 different objectives of US policy. As a result, the aid decisions are too often politicised and subject to short-term pressures. Overall, the programme ends up trying to do too much, too quickly.”

In light of these widely different perceptions it may sound ironical to suggest that it would be better for both the US and Pakistan that the US bilateral official assistance is terminated sooner than later. The growing ‘trust deficit’ between the two countries will be bridged when the US Congressmen would not have a stick to hurl at Pakistan and the pressure tactics they apply too openly and too frequently would come to an end. Ordinary US citizens would have no qualm that their taxes are being wasted in a country for which they have very little empathy. In Pakistan, the political leadership would have to take some tough decisions to mobilise domestic resources rather than always choosing the soft option of foreign aid as a substitute. The Pakistani intelligentsia would no longer be concerned about the loss of honour, sovereignty and dignity in exchange for a few billions of dollars.

How about the question so common in the vocabulary of both the Americans as well as many Pakistanis: Will Pakistan be economically able to cope with the loss of US assistance? The facts speak for themselves. Although the Congress authorised a tripling of development assistance in 2008 to $1.5 billion per year, the actual disbursements in Fiscal Year 2009 were $275 million and $676 million in Fiscal 2010, including $500 million spent on flood relief. Assuming that the whole $3 billion in economic and military assistance (including $1 billion under the Coalition Support Fund) is disbursed fully, this accounts for less than seven per cent of the total foreign exchange earnings of the country. The increase in export revenues and remittances in the current year was almost twice that amount. Had foreign direct investment flows not been disrupted (Pakistan received Rs5 billion in 2006-07) US aid would have become even less significant in the overall capital flows. World Bank data shows that net Official Development Assistance (ODA) from all sources to Pakistan in the last five years has averaged less than 1.5 per cent of Gross National Income (GNI). In 1990, ODA formed 2.7 per cent of GNI. Aid per capita from all sources in 2009 was $14 only. US aid also does not help the government’s precarious fiscal situation in any meaningful way as only 12-15 per cent of the total amount is channeled for budgetary support. These facts do not, by any means, indicate that the Pakistani economy will collapse if the US decides to withdraw its assistance.

When Secretary Clinton visits Pakistan we should thank her for the hard work the US administration did in getting the Kerry-Lugar legislation approved, but indicate that Pakistan would like to unilaterally withdraw from receiving assistance under it. Our strategic dialogue should continue to explore other avenues of cooperation. It is fair to assume that this step would lead towards building a strong and lasting relationship between the two countries based on mutual respect.

Published in The Express Tribune, May 20th, 2011.


US assistance: Differing perceptions – The Express Tribune
 
i am not really a fan of rupee news (though this might be my second thread quoting the website), but still what the guy says is plausible of not true. and to all the ranters and trolls; Please counter the 'facts' mentioned in the write up with some concrete points or else spare us the usual bee ess which is unleashed when this website is quoted.
Read on:

http://rupeenews.net/?p=35607

The reality of US Aid to Pakistan

Posted on 03 June 2011.


We are all aware of Hillary Clinton’s recent boast in front of the Pakistan media. “We provide more support than Saudi Arabia, China, and everybody else combined, but I will stand here and admit that I’m not sure many Pakistanis know that,” US Secretary of State Hilary Clinton said in Islamabad on May 27. Various media sources in Pakistan and the US have started to scrutinize this boast.

According tot he Economic Survey of Pakistan “The direct and indirect cost incurred by Pakistan on operations against terrorism during the past 10 years amounts to about USD 68 billion, which is equivalent to almost half of the country’s total debt.”

The direct and indirect cost of the anti-terror campaign rose from USD 2.669 billion in 2001-02 to USD 13.6 billion in 2009-10 and the figure is projected to rise to USD 17.8 billion in the current fiscal, roughly equivalent to the year’s tax target.

“Since 2006, the war has spread like a contagion into settled areas of Pakistan that has so far cost the country more than 35,000 citizens, 3,500 security personnel, destruction of infrastructure, internal migration, nose-diving of production and growing unemployment.”

The US has so far provided USD 13 billion in aid to Pakistan, of which almost USD 9 billion were military disbursements. The government expects to receive USD 1.45 billion this year from the US Coalition Support Fund , under which reimbursements are made for funds that have already been spent.

The US has made the process of auditing Pakistan’s requests for reimbursements more stringent and rejected several claims in recent years


Under scrutiny, Ms. Clinton’s message does not hold water. “Aid” for Pakistan is exaggerated. A lot of it is in the form of loans.

The US “Aid” is overblown and helps US interests. 50% of the so called US aid has to be spent on US contractors (US law–so this goes back to America), 25% is wasted on administrative expenses, and the rest is given to the US Ambassador’s favorite NGO to be duly deposited in US accounts. Almost none makes it to the Pakistanis. China is spending $30 billion in colossal infrastructure projects like dams, Heavy Mechanical Complex, Electricity grids, power plants, and freeways.

Much of the American military aid is not “aid” at all, it is reimbursement for monies spent by Pakistan. Most of it comes, in what are called “coalition support funds,” which are intended to reimburse allied militaries for operations beneficial to the United States.

The Pakistanis submit their costs; the U.S. decides whether to pay.

More than 40 percent of Pakistan’s requests have been rejected. Some of these requests may have been bogus — but a senior U.S. official says not all were.

The problem has more to do with American bureaucratic rules than with Pakistani mistakes. The U.S. is now declining to pay for death benefits which it used to pay.

The U.S. Agency for International Development commitment to civilian aid has never been vast.
Even successful projects can get lost in a roiling nation of perhaps 175 million people that is in the middle of a brutal conflict.

Afghanistan gets more than $100 billion and Iraq gets more than $600 billion in aid. Pakistan is about six times larger than either Afghanistan or Iraq, both of which have badly strained American knowledge, resources and patience.

Effort to increase civilian assistance to $1.5 billion per year has failed miserably.


Hillary Clinton recently made the claim.

“America cannot and should not solve Pakistan’s problems. That’s up to Pakistan. But in solving its problems, Pakistan should understand that anti-Americanism and conspiracy theories will not make problems disappear. It is up to the Pakistani people to choose what kind of country they wish to live in and it is up to the leaders of Pakistan to deliver results for the people.”

Most Pakistanis think that it is the US that continues to cause problems for Pakistan.

Figures from US officials reveal that Security-related funding, including the Coalition Support Funds (2002-2010) amounted to about $14.14 billion.

This included the operational cost of the 140,000 Pakistani troops deployed along the 2,560 kilometre border with Afghanistan and training programs for the paramilitary Frontier Corps.

Almost two-thirds of the amount going into security-related heads, while the social sector and economic infrastructure received the remaining one-third.

The USAID and private contractors spent more than 70 percent of the funds allocated for socio-economic development on their own support infrastructure in the recipient country.

Half of the money never leaves the company accounts in the USA. The situation in Iraq and Afghanistan is the same.


This prompted the Pakistani Ministry of Finance officials to seek US clarifications on how $488.537 million being provided under the Kerry Lugar Law Burmen (KLL) were being spent.

KLL provided for two modes of assistance: a) ”the budget money worth $1,025.335 million for the year 2010-11, and b) “off the budget” $488.537 million.

“Off the budget” assistance: Of the $488 million the USA plans to spend $170 million for International Narcotics Control and Law Enforcement (INCLE), $106.387 million for Office of Transition (OTI) and $60 million for humanitarian assistance, OTI chief mission (small grants funds).

The remaining amount of over $240 million will be spent through international NGOs and local NGOs. Pakistani authorities did not know details of this spending.

The American “Spent Plan” showed that Washington had so far obligated $1.025 billion for Pakistan after completing congressional procedural requirements.


The fact remains that the impact of US AID to Pakistan is insignificant.

“If US civilian assistance is completely withdrawn, it will only have an impact of 0.14 percent on Pakistan’s GDP growth,” said Shahid Javed Burki, a former finance minister and an ex-vice president of the World Bank (The News, Karachi, April 29, 2011).

Burki reached this conclusion after a study he conducted for the Washington-based Woodrow Wilson Centre.
The calculations were based on gross aid, and around 40 percent of that amount goes to the American consultants, while Pakistan only receives approximately 60 percent. These are conservative estimates compared with how US aid is being spent in Iraq and Afghanistan, where more than 60 percent of the money remains with the American contractors and consultants.

Ishrat Husain, a former governor of State Bank recently said that American aid does not help the government’s precarious fiscal situation in any meaningful way. Only “12-15 percent of the total amount is channelled for budgetary support… Assuming that the whole $3 billion (per annum) in economic and military is disbursed fully, this accounts for less than seven percent of the total foreign exchange earnings of the country… The increase in export revenues and remittances in the current year was almost twice that amount.”

World Bank figures also show the net Official Development Assistance (ODA) from all sources to Pakistan has averaged less than 1.5 percent of its Gross National Income in the last five years.

According to Sartaj Aziz, a former finance minister, “as long as the multilateral aid continues, it won’t impact Pakistan’s economy.” Out of $1.5 billion per annum authorised by Kerry-Lugar-Burman Act, actual disbursements have been $275 million and $676 million during 2009 and 2010 respectively (including the $500 million for relief and recovery after the floods of last summer).


The US media is screaming about the “Billions of Dollars” of aid to Pakistan. The reality is different. A recent study found that Pakistan has lost $68 billion in revenue because of the US war on terror. US Aid doesn’t come close to funding the difference. The US public overlooks the cumulative impact of Pakistan’s role in GWOT in terms of loss of domestic and foreign investments, decline in industry, capital-flight. The US and NATO forces abuse Pakistan roads and bridges and do not pay for their maintenance. The loss of infrastructure losses due to the militant activities has created a net loss for Pakistan.

US Aid in effect creates more problems for Pakistan than it is worth.

Sources: Agencies, NPR, AFP, BBC, Economic Survey of Pakistan, The Friday Times, Nation, Dawn, Economic Times.
 
wonder what indians say now!!

and the most shameful thing is, even though 70% of the 'aid' goes indirectly to the US again, still they boast about aid and on it implement conditions, its not even aid, its the spit money which US gives to pakistan, the article doesnt even mention how much aid money does US actually give, its very much less than the aid mney which has been talked about

and as compared to afghanistan and iraq, pakistan is the country which faces more bombs and explosions then these countries, and still pakistani govt has made pakistan treated worse than a pig

can hold americans because pakistan is responsible for what is being done to it
 
The "aid" is basically money used in hiring our army out as US proxies. This was approved and continues to be approved by the leadership. Funds are transferring into state bank accounts as I type for the N.waziristan operation. Our frustrations are mis-directed. Our leaders have been using these business transactions as a way to balance the books. Therein lies the problem.

It is widely known that Pakistan has exaggerated claims with regards to military spend as the forensic accounting of the invoices have been examined by obomas administration, something which wasn't present when Bush was commander and chief.

Needless to say, this "aid" is recycled back into the US economy by the military which has a penchant for acquiring US hardware and tech. The average citizen doesn't see a rupee of this. You know there's a problem when nearly 20% of the national budget is spent on a bloated army and ONLY 1.2% is allocated on education.

The more stringent and reluctant the US congress are to approve of monies to Pakistan, no doubt the more pressure Pakistan army will feel obliged to do the USA' s dirty work at a cut-rate price. One things certain, this business model is destined to fail and unless real investment is brought back to the country, we'll be back to the IMF cap in hand.
 
Well Pakistan is getting money in US dollars. And spending money on rupees. It is like export economy. In India we have special export zoned where no tax and new road and some special subsides. These are for getting foreign exchange.
 
Well Pakistan is getting money in US dollars. And spending money on rupees. It is like export economy. In India we have special export zoned where no tax and new road and some special subsides. These are for getting foreign exchange.

68 billion loss on on wot, n 32 billion aid, lots of money right?
 
68 billion loss on on wot, n 32 billion aid, lots of money right?

If you think that Pakistan is loosing financially then who told it to you to join WOT???? So of course for getting financial aid only Pakistan has joined...Now it depends on Pakistan about bargaining a right deal with USA....If Pakistan thinks that this deal is not going anywhere...then you should stop taking aid immediately rather than complaining about it..
 
If you think that Pakistan is loosing financially then who told it to you to join WOT???? So of course for getting financial aid only Pakistan has joined...Now it depends on Pakistan about bargaining a right deal with USA....If Pakistan thinks that this deal is not going anywhere...then you should stop taking aid immediately rather than complaining about it..

it was for world peace, who knows what would happen if Pakistan wasnt fighting wot right now
 
68 billion loss on on wot, n 32 billion aid, lots of money right?

$32 billion is the total aid Pakistan has received from 1947-2011. Out of which, Pakistan has received $21 billion from 2001-2011, while suffering $68 billion losses.
 
Why the heck doesn't Pakistan kick the Americans out? They should manage their own affairs without interference from the big daddy. But then, it's going to be an uphill task for Pakistan to manage both its Eastern and Western borders as well as the enemy within.

Pakistan and India must sign a 'Friendship' or similar treaty at the earliest so that additional forces from Pakistan's Eastern border can be shifted to beef up the forces that are fighting a protracted war on terror. Or is there an alternative?
 
Sir,

10 years ago pakistan and pakistanis wanted to make a vietnam of the united states of america---in their arrogance---the paks were bragging about what they would do the americans when they come into afg------.

People----do you get it now what happened to vietnam when the americans came and left----or is there any left to learn about it ( koi kasar reh gai hai samajhney ki ----aur banao veitnam amrika ka )------. So pakistanis have helped make a vietnam for america in afg----now can you feel the pain of what vietnam went through---.

Xeric----pakistanis don't understand----they can't understand----they don't have the capability to understanbd----the economy in pakistan was on a turn around----it was the begining of boom in business in pakistan's economy---pakistan was at the verge of coming out of the slums that they had been living in----the only thing in its way was a man kicked out of every country that gave him sanctuary in the face of adversity----the only fools left in the world were the afghans and pakstanis----.

Who gives a hoot if Bin Laden did the 9/11 or not----he was nothing to us----we should have helped our afghhan brothers kick him out of afghanistan or simply executed him and turned over the dead body to the americans----.

Histories of successful nation are built on taking hold of the oppurtune moment and riding the raging bull on its back---history of failed states are filled up with a million and one excuses like pakistan has-----.

My grandgfather used to tell me---SON TIME IS LIKE A HORSE ON A FULL GALLOP---GRAB IT BY THE NECK AND RIDE ITS BACK---AND YOU WILL PROSPER---BUT IF YOU GRAB IT BY THE TAIL---YOU WILL BE DRAGGED ALONG ALL YOUR LIFE ONLY IF YOU HOLD ONTO IT---AND THAT WILL LEAVE YOU BLOODIED---YOU MAY GET THERE BUT THE RIDE WILL BE EXTREMELY PAINFUL---BUT IF YOU LET IT GO---YOU WILL BE TRAMPLED BY THOSE TRAILING THE STEED.

And I used to say to myself---" what is this old fool saying--I got all the time---I can do it anytime "---till I found out that suddenly it got too late.

That is what you pakistanis are learning now----it got a little too late----the game players have changed the rules.
 
Sir,

10 years ago pakistan and pakistanis wanted to make a vietnam of the united states of america---in their arrogance---the paks were bragging about what they would do the americans when they come into afg------.

People----do you get it now what happened to vietnam when the americans came and left----or is there any left to learn about it ( koi kasar reh gai hai samajhney ki ----aur banao veitnam amrika ka )------. So pakistanis have helped make a vietnam for america in afg----now can you feel the pain of what vietnam went through---.

Xeric----pakistanis don't understand----they can't understand----they don't have the capability to understanbd----the economy in pakistan was on a turn around----it was the begining of boom in business in pakistan's economy---pakistan was at the verge of coming out of the slums that they had been living in----the only thing in its way was a man kicked out of every country that gave him sanctuary in the face of adversity----the only fools left in the world were the afghans and pakstanis----.

Who gives a hoot if Bin Laden did the 9/11 or not----he was nothing to us----we should have helped our afghhan brothers kick him out of afghanistan or simply executed him and turned over the dead body to the americans----.

Histories of successful nation are built on taking hold of the oppurtune moment and riding the raging bull on its back---history of failed states are filled up with a million and one excuses like pakistan has-----.

My grandgfather used to tell me---SON TIME IS LIKE A HORSE ON A FULL GALLOP---GRAB IT BY THE NECK AND RIDE ITS BACK---AND YOU WILL PROSPER---BUT IF YOU GRAB IT BY THE TAIL---YOU WILL BE DRAGGED ALONG ALL YOUR LIFE ONLY IF YOU HOLD ONTO IT---AND THAT WILL LEAVE YOU BLOODIED---YOU MAY GET THERE BUT THE RIDE WILL BE EXTREMELY PAINFUL---BUT IF YOU LET IT GO---YOU WILL BE TRAMPLED BY THOSE TRAILING THE STEED.

And I used to say to myself---" what is this old fool saying--I got all the time---I can do it anytime "---till I found out that suddenly it got too late.

That is what you pakistanis are learning now----it got a little too late----the game players have changed the rules.


Mastankhan, I agree with you in a sense for I always thought that OBL was rather curse to the Muslim World, but what is it in you that compels you to say only those things that please the warmongering americans and the indians? Do you have business dealings with them?
 
The "aid" is basically money used in hiring our army out as US proxies. This was approved and continues to be approved by the leadership. Funds are transferring into state bank accounts as I type for the N.waziristan operation. Our frustrations are mis-directed. Our leaders have been using these business transactions as a way to balance the books. Therein lies the problem.

It is widely known that Pakistan has exaggerated claims with regards to military spend as the forensic accounting of the invoices have been examined by obomas administration, something which wasn't present when Bush was commander and chief.

Needless to say, this "aid" is recycled back into the US economy by the military which has a penchant for acquiring US hardware and tech. The average citizen doesn't see a rupee of this. You know there's a problem when nearly 20% of the national budget is spent on a bloated army and ONLY 1.2% is allocated on education.

The more stringent and reluctant the US congress are to approve of monies to Pakistan, no doubt the more pressure Pakistan army will feel obliged to do the USA' s dirty work at a cut-rate price. One things certain, this business model is destined to fail and unless real investment is brought back to the country, we'll be back to the IMF cap in hand.

Ok.
Whatever you said was regarding the military aid that we receive, but what about the civilian aid? Any pearls of wisdom on that? Had you read the quoted article with any sanity, you would have known that the discussion mainly revolved around the civilian aid, nonetheless the military aid (in terms of CSF etc) is also an important facet of the so the called aid.

Also, instead of the military, should we expect an ex-pat to fight for us now?
 
Mastankhan, I agree with you in a sense for I always thought that OBL was rather curse to the Muslim World, but what is it in you that compels you to say only those things that please the warmongering americans and the indians? Do you have business dealings with them?

Why is there the temptation to drag in India into Pakistan's problems? Did Pakistan enter into the WOT before the barrel of an Indian gun?? In fact if Pakistan duplicated 1980's Indian foreign and internal policy, it would be a rising power in Asia. So much for your "warmongering Indian" theory. If that held any weight then your country would be a non-entity. So stop, pause or whatever, but think before you ink
 
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