Foreign Aid for Pakistan

Pakistan has secured more than $5 billion in fresh aid over two years at a donors conference, held rently after President Asif Ali Zardari vowed to step up the fight against militants. The amount exceeded Pakistan’s hoped-for $4 billion and comes at a time when the international community is worried an economic meltdown in the country could fan popular support for Al-Qaeda and other militant groups. Commitments to existing aid programmes totalling $15 billion were reaffirmed.

Foreign investors are eager to see Islamabad proceed with tough economic reforms seen as vital to restore growth. Pakistan is already being propped up by a $7.6 billion loan from the International Monetary Fund (IMF) over two years.

Pakistan was told that the aid was aimed at equipping, training and building infrastructure directly related to counter-insurgency operations” and “not to support any person or group that conducts violence, sabotage or other activities meant to instil fear or terror in India. The reality, however, has been different. Pakistan is indeed on test. Its failure to respect the donors’ mandate must not go unpunished.

Aid Under US Plan for South Asia
Nuclear-armed Pakistan is central to the US President Barack Obama’s plan for South Asia. That plan includes trying to stabilise Afghanistan where Taliban militants, many operating from lawless enclaves in northwest Pakistan, have thrown the effort into doubt. Pakistan President assured Islamabad’s allies that Pakistan would do its utmost to deliver on economic reforms and fighting militants.

With the support of the IMF, the World Bank, and other development partners, Pakistan is now returning to a path that should allow for economic growth and poverty reduction. While it has been imperative to focus on the short term, in terms of regaining macroeconomic stability, the World Bank would not also want to undermine the importance of staying focused on the longer- and medium-term priorities.

Pakistan has a wish-list of projects worth $30 billion that it wants to see implemented over the next 10 years, including hydro-electric dams, roads and projects aimed at improving security in its violence-plagued northwest on the Afghan border.

The US said it would provide $1 billion in aid over two years, subject to approval from Congress, matching a pledge from Japan.

Efforts to Counter Terrorism
The underlying message that the donors — the US, Japan, the European Union and Saudi Arabia — have sent out is that they are one with Pakistan in its efforts to maintain stability, which is essential for preventing the spread of terrorism.

The idea is to ensure that Pakistan does not lack funds for launching development-related projects, particularly in its terrorist-infested tribal areas, as terrorist outfits like Al-Qaida and the Taliban have been exploiting poverty to expand their bases. The hope is that terrorist outfits may find it difficult to get fresh recruits to their destructive cause in an atmosphere of increased economic activity.

The Other View
The trouble is that there is no proper mechanism to ensure that the funds being made available to Pakistan by the international community in the name of fighting terror will be used only for the intended purposes. Pakistan has a history of diverting financial assistance to strengthen its military vis-à-vis India. This can happen again in the absence of a foolproof system for channeling these funds into infrastructure and other such development project.