Sugar Daddy no more: US aid to Pakistan is drying up

“Foreign aid is not the solution to our problems and sufferings”, prime minister Nawaz Sharif declaimed in 2009, riding the wave of the tide of anti-American resentment that swept across Pakistan following the killing of Osama bin Laden. “The real way of success is self-reliance, as nations make their fate themselves”.

His hopes, not many weeks after he took power, may be coming true—and he probably isn’t pleased.

Figures made available in a new United States Congressional Research Service report by experts Susan Epstein and Alan Kronstadt, which Firstpost published online today, show president Barack Obama’s administration has requested just $1.16 billion for aid to Pakistan in the 2014 financial year—half or less of the $2.6 billion it spent in 2012; a quarter the $4.5 billion it spent in 2010. Sharif’s generals will get just $397 million of the FY2014 allocation—down from over $1.2 billion in 2010.

In the grand scheme of things, these aren’t huge amounts: expatriate workers sent home an estimated $12.8 billion from July, 2012, to May, 2013.  The real problem, from Islamabad’s point of view, isn’t the aid itself—but the message its decline sends out on its relationship with the United States.

Nawaz Sharif during his swearing in-ceremony. Reuters

Nawaz Sharif during his swearing in-ceremony. Reuters

Even by it’s dysfunctional standards, Islamabad is in big economic trouble. Yesterday, it reportedly secured an emergency $5 billion bailout from the International Monetary Fund—in return for committing to sharp increases in taxes and energy tariffs.  Prime Minister Sharif’s core constituency among industrialists and the urban petty bourgeoisie sabotaged earlier efforts to bring about tax reform.  That’s why the IMF didn’t accede to Pakistan’s original demand of $11 billion—and may prove unwilling to throw more cash at the problem three years from now.

The United States' aid effort has, in essence, been a signal that the superpower would always stand by its troubled ally.

Centre for Global Development experts note that FY2011 funding “exceeded the $1.39 billion requested for combating climate change, the $1.3 billion for the Millennium Challenge Corporation, and the $861 million for disaster relief worldwide”.  “As a point of comparison”, it records, “the United States has pledged nearly ten times more nonmilitary aid to Pakistan than to Bangladesh, a neighboring country with a comparable population size”.

Chart showing falling in security and economic aid from 2011 onwards.

Chart showing falling in security and economic aid from 2011 onwards. Data from United States Congressional Research Service report on Pakistan aid.

The aid, the Congressional report says, helped keep Pakistan’s flailing power sector afloat, educated the poor in the country’s tribal areas and protecting flood victims.

It also provided Pakistan’s generals a functional military, gifting Orion P3 maritime surveillance aircraft,  a frigate, AH1F attack helicopters and upgrades for F16 combat jets.  This equipment is of dubious utility in fighting terrorists in North Waziristan, where Pakistan’s army has in any case refused to operate, but excellent for use against India.

Hilary Clinton, as secretary of state, even waived laws requiring aid be given only after certification that Pakistan is “cooperating with the United States on a range of counter-terrorism, nonproliferation, democracy, and other issue-areas”.

The condition-free cash didn’t, however, helped the United States win friends: as the report notes, “there is no notable correlation between US humanitarian aid and Pakistani views of the United States”.

In Congress, this has fuelled irritation. In May, 2012, a tribal court in Pakistan sentenced Shakil Afridi, a doctor who helped lead the Central Intelligence Agency to Osama bin Laden, to 33 years in prison for treason.  There is now legislation pending prohibiting further aid to Pakistan until Afridi is released.  In a hearing in April, one member of Congress asked secretary of state John Kerry how long he intended to use diplomacy to get Afridi released, "rather than just cutting off their aid."

Kerry replied that this would “not be a good move, certainly at this point in time, for a lot of different reasons”.

He left one thing unsaid: at another point of time, things might be different

For an understanding of why that point of time might be coming quite soon, we have to turn to history. For the most part, the cross guided the cash in Washington DC’s foreign-policy making—the rough opposite of the East India Company, where the cross floated through in the undertow.  The crusade was fighting communism. The last-General Officer-Commanding of the British Indian Eastern Command, Francis Tuker, believed the creation “of a new Muslim power supported by the science of Britain” would “place Islam between Russian Communism and Hindustan”.  Likewise, the United States wanted Pakistan on its side.

In the 1950s, as data analysis shows, Pakistan got a tidal wave of aid even bigger than its 9/11 bonanza. You can view the charts below. There was a second tide of aid after the Soviet intervention in Afghanistan: President Ronald Reagan famously described the Afghan jihadists who would later his country’s cities as “freedom fighters”. 9/11 was a gift for General Pervez Musharraf—just as the Afghan jihad had been for Zia.

Now, though, the Afghan war is drawing down—and with it, United States aid is drying up. The United States will still have an interest in preventing a nuclear crisis in the region, meaning it will provide some aid to win influence in Pakistan’s military.  However, it will expect regional powers India and China to take the lead role.

Pakistan’s politicians claim they’ll be able to leverage the country’s relationship with China to tide over the hard times ahead.  Earlier this year, though, I argued in Firstpost that China just isn’t interested in being Pakistan’s sugar daddy. Economist Farooq Tirmizi shares that assessment. “In the 12-year period between July 2000 and June 2012”, he wrote in a stellar essay on Pakistan’s imaginary love affair with the dragon, “net foreign investment in Pakistan amounted to about $29 billion, according to the State Bank of Pakistan. Of that, just $0.8 billion came from China, and nearly all of that was China Mobile’s investment in Zong”.

For a sense of scale, consider this: China has invested less in Pakistan than that great power of cheese, the Netherlands. Great Satan, by way of contrast, has invested $7.7 billion, a quarter of all foreign investment in the country.

Like the parents of drug addicts, United States has long enabled Pakistan to avoid the consequences of its self-destructive conduct. Now, it seems to be deciding to cut its troublesome child loose.

Nawaz Sharif should have been careful what he wished for.

Table from US Foreign Assistance report.

Table from US Foreign Assistance report.


Table from US Foreign Assistance report

Table from US Foreign Assistance report

Updated Date: Jul 03, 2013 13:57 PM

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