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July 27, 2017

The aid factor


July 27, 2017

Pakistan, like many other developing countries across the globe, has been a recipient of US aid for decades. And like other numerous nation states – such as Afghanistan, Egypt and Israel – Pakistan has been primarily receiving US assistance because it has geo-strategic and security significance for the US.

According to A S Natsios, the former administrator of the USAID, “politics is part and parcel of aid delivery in all donor countries, in Europe as well as in America”. However, only seldom has any other donor explicitly aligned the provision of aid to its foreign policy goals the way the US has been doing for a long time. The US has done so in the past, is doing it today and will continue to do so in future.

The often told and retold story of America’s love-hate relationship with Pakistan is, in fact, a marriage of convenience. It can be summed up as by examining the close alliance in the cold war setting in the 1950s and the 1960s, the US arms embargo after the 1965 war and the imposition of the Symington Amendment in April 1979 whereby the US cut off all economic and military aid.

All sanctions were lifted and aid was resumed after the Soviet invasion of Afghanistan in 1979. Once again, sanctions were imposed under the Pressler Amendment in 1990 after the withdrawal of Soviet forces from Afghanistan. More sanctions were introduced after the 1998 nuclear tests and the 1999 military coup imposed by Musharraf. And yet again, we witnessed the withdrawal of unilateral US sanctions and a close ‘alliance’ in the so-called ‘war on terror’ after 9/11.

There are several other issues at play. But the aid factor is peculiar in the relationship between the two countries. While some of the relevant aspects are often discussed in both print and electronic media, it is frequently debated whether Pakistan can live without US aid or not. In view of the current state of the country’s fragile economic health and a multitude of crises, it will be hard to say yes. But the answer, in fact, is a ‘yes’. This argument can be underlined through two examples backed by empirical analysis.

As mentioned earlier, Pakistan has been among the largest recipients of US aid. According to the US Overseas Loans and Grants (Greenbook) database, the US gave more aid to Pakistan in the 1950s and 1960s than it gave to Israel, its closest ally. In the late 1960s and the 1970s, US-Pakistan relations were not as friendly as in the previous decades. As a result, US aid declined sharply – particularly after the 1965 and 1971 Pak-India wars. The alliance was revitalised after the 1979 Soviet invasion of Afghanistan. Throughout the 1980s, Pakistan received more than $500 million per year in economic aid and a similar amount in military aid.

So can Pakistan survive without US aid? After the 1990 Pressler Amendment and the accompanying sanctions, all the channels of US aid to Pakistan were closed. During the 1990s of the post-cold war decade, Pakistan was under US sanctions and was ineligible for US aid. A country that was receiving substantial US assistance during the 1980s survived without US aid in the 1990s. While there were financial problems, they were largely an outcome of our own domestic mismanagement, political instability and unbridled corruption. If we survived then, can we not survive today?

The US has been allocating substantial aid to Pakistan since 9/11. But is it enough to compensate the country for what it has lost? The US may well say that it has been giving Pakistan billions of dollars in the form of aid. But what does a billion dollars actually mean for Pakistan? It is argued that Pakistan has been the largest US aid recipient along with Afghanistan and Israel. While this may be true in aggregate terms, when it comes to per capita aid it is – what General Zia had famously said of the then US president Carter’s offer of $325 million – ‘peanuts’. For example, Afghanistan – with a population of about 34 million – received about $105 per capita aid from Israel and the US and pocketed $346 per capita in US aid (including security assistance). Contrary to this, Pakistan – with a population about 200 million – received less than $4 per capita aid from the US.

If it is argued that the US gave more aid to Afghanistan as it is poorer than Pakistan, how do we explain the aid provided to Israel, which has a GDP per capita of $37, 292? It’s simple: US aid allocations are based on America’s foreign policy goals rather than the poverty and development needs of the recipients.

Each Pakistani has been getting less than $4 per year and for this measly amount the entire country of about 200 million people has to hear incessant taunts about the curtailment of US aid every now and then when Uncle Sam gets annoyed. If we ask a poor Pakistani whether he will ever bargain on less than Rs424 per year, the answer will invariably be in the negative.

The $4 includes all US civilian aid – about half of which is utilised by US-based USAID contractors and implementing partners and goes back to American pockets. What does every Pakistani get then? In fact, their share amounts to less than $2 according to USAID data – about Rs 212 per year or less than Rs17 per month. What is the actual significance of Rs17 a month in the lives of even the poorest of Pakistanis? For Rs17 a month, we hear so much noise as if the entire economy is run through US aid and we will starve to death if US assistance is stopped.

The question is: how much will it affect the life of ordinary or even the poorest of Pakistanis if we stop receiving Rs17 each month? This is the truth behind US aid.

However, we must not infer that the alliance has done no good to Pakistan and that Islamabad should sever ties with Washington. Academic honesty necessitates that we acknowledge and thank US taxpayers as the US was the largest provider of aid in the aftermath of three devastating disasters: the Kashmir earthquake in 2005, the rise of militancy in Malakand and Swat in 2009 and the 2010 floods.

Similarly, USAID has funded a number of projects in health, education, energy and other sectors. Instead of taking unilateral decisions and having lofty expectations, there is a need for a relationship that is based on trust, mutual respect, equality and understanding each other’s concerns and limitations.

The writer is a postdoctoral research fellow at the German Development Institute at Bonn, Germany.

Email: [email protected]

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