The hoax of US Aid to Pakistan

Cross post from RUPPEE NEWS:
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 kilometer 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 US AID 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 channeled 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 authorized 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.
Post a comment or leave a trackback: Trackback URL.


  • Shokat Ghulam  On June 6, 2011 at 4:42 pm

    All this nonsense (USAID) comes with strings attached …!

  • A Malik  On June 6, 2011 at 7:18 pm

    Why after all we are discussing that US gave this and not that. And that she gave to Afghanistan this much and to us this much. It is interesting that the remittences of the overseas Pakistanis amount to $10 Bn. We do not care for them. But we are tasting our own spit – so to speak- for a miserly 1.5 Bn. Why the hell we do not say Allah Hafiz to this amount . Whether it is 1.5 or 15 bn just throw it back. We need respect and pride and not be known that”pakistanis can sell their mothers for money” – a similar sentence that I had used in a purchase two years earlier for one of the European country when they were trying to be stiff and arrogant to insist on their conditions . which were not in our country’s interest. I always maintain that “u compromise once u will compromise endless”

  • Amir Rana  On June 8, 2011 at 1:30 am

    That is the spirit we need Malik Sb. I am 200% sure that once we decide to stand up on our own feet, our upward movement as a nation would start. Being a student of Finance and Economics, I have my grounds to say that even declaring default would benefit us in the long run. People are ready, circumstancially if not willfully, to go through a difficult period of five years or so. They are being continually warmed up since last few years (what more bad can happen?).

    We shall start a discussion on this topic in future. Time is not right as yet for such a discussion since our first priority at this point of time should be to come out of this ditch of slavery. Which way to go would be discussed later. Please go through my detailed email I sent a short while ago and give your comments/objections to my views.



  • S. Cadri  On June 8, 2011 at 1:31 am

    If you really want to get out of slavery then introduce land ceiling. They should be no rulers, ruling class and the ruled class the slave class. Denounce feudocracy – of the feudals, by the feudals and for the feudals. Promote democracy of the people, by the people and for the people. Rest is non-sense

  • Portugheis Alberto  On June 8, 2011 at 1:32 am

    Be careful, USA are not stupid!!!!!! some 10 years ago Mexico declared Bankrupcy and look at the mess it is today. The only way a country could stand up on its own feet would be if the politicians running the show were all multi-millionaires, (billionaires even better) and they don’t need to accept bribes in order to have a good life.

    I am not opposed to richer countries helping poorer countries, but the question is “how” this is done. One thing is to help the poor country develop into a modern, affluent country. Another is to help them buy weapons and make wars, that is helping the country get poorer, more indebted, thus halting any possible progress.

    • Amir Rana  On June 9, 2011 at 9:38 am

      There is a big difference between geographic and economic positioning of Mexico and Pakistan. Even the tools for survival are not comparable. In my opinion, we are in a lot better position. Even then, just try to think a little out of the box of routine economic indicators and then see what “actual” and “factual” difference is there for the masses of Mexico? It is again quite a technical debate for which one has to look beyond highly subjective rather rotten norms of orthodox economics. One also needs to study the case of Brazil. What happened when they showed their inability to pay back the loans?

  • M Malik  On June 9, 2011 at 12:38 pm

    We will be interested to know the case of Brazil pl

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: