Foreign Aid: where is it taking us?


Foreign aid has been in rotation since the world has realised that it cannot continue being insensitive to the need and aspirations of people, left poor and bereft, by either diluted human intentions or financial misgivings of any given country. These two miscalculations have always left a larger proportion of human beings dependent on aid, irrespective of the resource input at their disposal.
The case of Pakistan matches this example very well. Bundled in the energy crisis, the country has around 850 trillion cubic feet of coal lying untapped under the crust of Thar that could produce 10,000 megawatts of electricity for the next 30 years.
The magnificent water resource in the mountainous glaciers of NWFP, left to squander in the absence of water reservoirs (that inundated Pakistan last year in the worst flood of its history) and the goldmines and the silicon valleys lying in abundance across North-west Pakistan (one of which, Riqo Diq has been attempted to be sold off lately at cheaper rates), are a few examples of the enormous resources this country is blessed with, and is yet living from hand to mouth on many economic and financial fronts. Just like sentiments play their role in mutating the number game on stock markets, the role of undiluted intention, to grow out of the debt circuit realm, makes a strong case for real economic development. It is the missing role of this very “intention” that, in spite of having every resource, we are laced with debt. In the recent budget, all four provinces and Federal Government have received their share of foreign aid from Japan, World Bank and Asian Development Bank for different projects. The following is the region-wise break up of foreign assistance to Pakistan.

The Punjab Government will receive Rs9.97 billion in foreign aid to share the announced Annual Development Programme (ADP).
The Sindh Government would receive at least Rs9 billion of foreign assistance projected towards its developmental projects during the upcoming fiscal year.
Khyber-Pakhtunkhwa has turned down $1.3 billion in foreign loans which were offered with unacceptable conditions. The province is expected to receive Rs16 billion in foreign aid.
In its Rs164.447 billion tax free budget for fiscal year 2011-12, Baluchistan government would be getting Rs2.2225 billion in terms of foreign assistance.
Federal Government
It is expected that the federal government would be given $3.3billion in foreign aid to finance its expenditure ridden bills, in the financial year 2011-12.
Begging bowl hallucination
Lately, Punjab has been irked over Osama bin Laden’s killing in Pakistan carried out through unilateral American attack without informing Pakistan. It has been the begging bowl that got the hardest hit by Mian brothers. Though, eventually they managed a narrow escape from this hasty decision in the face of an economic crunch by saying that, “it is only the debt with extra baggage that we have a problem with, other than that, we are fine with the phenomenon of foreign aid”. However, if at any point in history we could manage to get away from this begging bowl hallucination, perhaps that would be the time when our progression to reality, solidarity and economic emancipation would come to pass.
Aid is a stopover, not a destiny
There are countries that have emerged as economic powers from the clutches of debt. Today they claim top positions on the global GDP scale. China, India, South Korea and Taiwan are few of them. However, in spite of human relations consideration and an intelligent use of borrowed resources, aid has earned itself a flawed name for itself over the years. It is argued that money flowing to a debt bowl has no match to investment opportunities that bring diverse options in the form of product development, skilled labour, cultural reforms, consistent foreign exchange and no liabilities. Many kinds of aid, either bilateral or multilateral have strings attached to them, putting the recipient country at war with itself. Some fight this battle with a goal to harness the power of time with added resources, making themselves economic giants, eventually. Some simply pass the burden of ineffective debt management to citizens, but living thyself with a relentless desire to have more of it to maintain personal growth. Pakistan perhaps falls in the latter category of mindsets. Foreign aid to Pakistan has perhaps become sin qua non to a ventilator, removing it would force the entire body to give in to the pressure of invading diseases. The balance of payment crisis, debt servicing crisis, rising poverty; Pakistan is plagued with many serious concerns. Having had a flood of economic assistance in the name of foreign aid, there has been no real improvement in Pakistan. In fact it has gone from bad to worse; country’s budget 2011-12 has again shown that we are on the precipice of an economic show down.
The flimsy economic self of Pakistan
Pakistan’s debt to GDP ratio is around 55.5 per cent. It has a tax to GDP ratio of 9.3 per cent and total revenues are estimated at 13.6 per cent of the GDP and last but not the least defence spending stands at 25.6 per cent of the total budget. In simple terms what we are saying is that this country is earning less and spending more. But in another stark way to put it would be that the country is begging more and spending even more on misadventures. We can even go as far as saying that people around here want to mint money, without taking any responsibility to socially manage and develop Pakistan. These individuals are popularly known as tax evaders. They are earners and breeders of their own fortune, having little to save for the development of Pakistan. Being an open ended case now, one can easily allege that a huge proportion of these evaders sit in the national and provincial assemblies. Or they come from kingmakers sitting outside the ruling ring but having greater authority over rule of law then the ones sitting inside. Under such economic constraints, it is always foreign assistance that comes to rescue Pakistan in its financial troubles. When we went to IMF in 2008, to narrate the story of our depleted foreign reserves, assistance did come, however, without a happy ending. Though we managed to fill the coffers to avert a trade imbalance, the strings attached to the IMF loan drenched the poorer further into poverty. Inflation, high energy costs, diminished subsidies on energy and agriculture sectors and its likes have stymied an ordinary person from moving ahead into life with any vigour or future prospects.
The aim to eliminate poverty
The debate that the provision of foreign aid has crippled the ability of Pakistan to expand economically has been floating for a number of years now, without yielding any positive results though. It has been argued that aid has failed to eliminate poverty from the region; in fact poverty has risen over this period of time. Although, it is true that the purpose of any aid programme has been to take care of poverty in a recipient country. There are almost five different ways in which poverty is bridled through an aid programme.
1. Creating conditions for raising income and consumption of poor.
2. Initiating specific projects or sector-wise activities.
3. Improving peoples’ welfare through social services, including education, nutrition, housing or family planning.
4. Assist the process of social change which provides assets to the poor.
5. Support policy reforms that benefit the poor.
Almost none of the above goals have been missed out by the donor countries doling out funds to Pakistan; however the genie of endemic poverty cannot be returned to the bottle. The reason can be explained in one short crisp description, the leadership crisis in the recipient country and a vested interest of the donor country.
Enigma of lost aid
United States has been the major aid provider to Pakistan. Especially in the wake of 9/11, Pakistan was not only taken off the debt list but unprecedented aid flowed through direct and indirect channels to Pakistan. The idea was to curb terrorism sprawling in Afghanistan with its tentacles stretched into Pakistan. Our airbases, army, intelligence and security personnel needed to accomplish the politically magnified task of eliminating Al-Qaeda. A complacent leadership was needed to sign agreements, such as allowing parallel networking by CIA in Pakistan and letting drones spew missiles over our North-west province. The aid-starved Pakistan gave every bit of the above to America, with a result that ten years down the road, an angry mob in and around the country stepped up against Pakistan Army, for hiding Osama in army enclaves at Abbotabad. Aid given to Pakistan is being questioned in the congress and the discussion of cutting it down is being debated as well. There is a growing disconnect between Pakistan Army, the major recipient of US aid, and CIA. The celebration is almost over; the nation needs an answer from its top army and political brass about the money given in aid for the people of Pakistan, in exchange for their mental peace, national sovereignty, honour and right to live. When the war on terrorism engaged Pakistan in its whipping swirls, its GDP growth rate was 4.8 per cent, inflation was 5.2 per cent, poverty was 40 per cent and unemployment was 5 per cent. Aid received so far from US alone in these ten years under military and civilian heads comes to $24 billion. In spite of this ballooned aid, the situation of Pakistan appalling today. GDP growth is at 2.7 per cent, Inflation has reached to 13.23 per cent, poverty levels are hovering at 37.5 per cent and the unemployment rate has reached to 15 per cent. Though the donor country could have used its leverage and policy dialogue arsenals to manage desired allocations of aid, it was the responsibility of our leadership to fuel the engine of growth with the given financial assistance.
It goes without saying that, unless we let aid help us towards structural transformation of the economy to enable us to obtain foreign capital through normal commercial channels, we would keep squandering the assets and pushing more people below the poverty line. But for this to materialise, a sincere and good intentioned leadership is required, not one that sits on billions of dollars stashed in Swiss banks or other foreign investments.