It goes without saying that the United States is and has been one of the major development partners of Pakistan. It accounts for 21 percent of Pakistan's total trade. It is still the largest (17% or $ 2.5 billion) export market of Pakistani products. It is the third largest source of workers' remittances ($2.4 billion or 12.6%) and one of the major foreign investors in Pakistan. Economic ties between the two countries have, however, considerably strained over the last 15-16 years in general but more so during the last 7-8 years, thus reflecting the changing priorities and interests of the two countries vis a vis. each other.
United States is a superpower and wields a lot of influence (being a major shareholder) on International Financial Institutions. Accordingly, it has played a pivotal role in the past in encouraging the IMF and the World Bank to assist Pakistan in its difficult financial conditions. A friendly United States is also considered important in rating Pakistan's sovereign credit risks by the international rating agencies. Pakistan acknowledges the economic and political support that the United States has provided in its difficult hours in the past.
The total amount that Pakistan received from the United States since 2001-02 and until 2016-17 stands at $ 33. 4 billion, of which, $ 14.6 billion (or 43.7%) is the Coalition Support Fund (CSF). The CSF is simply the reimbursement of expenditures that Pakistan incurred while fighting the War on Terror. Since this war is being fought on daily basis, the expenditures are also incurred daily. At the end of the month, the bill is prepared by the Joint Staff Headquarters and shared with the representatives of the US government in Islamabad. After a detailed scrutiny of all the expenditures and approval by the local authorities, the bill is then forwarded to the headquarters of the US Central Command in Tampa, Florida and after its approval, goes to the US Department of Defense for reimbursement.
The reimbursement has usually been received by Pakistan after a lapse of, on average, six months. Since Pakistan borrows money from domestic sources to finance the war and the reimbursement is made after six months, the interest cost of the borrowing (in billions of rupees) is borne by Pakistan itself. The interest cost has never been the part of the reimbursement. All in all, $14.6 billion is reimbursement of Pakistan's expenditure and therefore, cannot be regarded as US aid to Pakistan. The United States itself treats CSF as "'Defense Department funding to reimburse Pakistan for logistical and operational support...; it is technically not foreign assistance". Still Donald Trump included this amount in his $33 billion 'bill'.
Adjusting for CSF, the non-CSF US assistance amounts to $18.8 billion. Within non-CSF funding, $8.0 billion is the total security-related assistance, of which, $6.2 billion (or 78%) is Foreign Military Financing ($3.8 billion) and Counter Insurgency Fund ($2.35 billion). It is the same $255 million under FMF which has been suspended by the US Administration. The Pakistani military does not get cash under FMF but gets military equipment of the same amount. Can it weaken Pakistan's military capability if it doesn't get $255 million worth of equipment? I guess not. The remaining security-related assistance ($1.2 billion) deals with narcotics control and law enforcement, military education and training and so on.
After adjusting security-related assistance ($ 8.0 billion), the remaining $ 10.8 billion is the economic assistance that Pakistan received during the last sixteen years from the United States. This amounts to yearly average of $ 678 million, roughly one percent of Pakistan national budget, of which, bulk (3/4th) of the economic assistance has been disbursed by the USAID. The government of Pakistan has received very little US economic assistance directly. If the USAID stopped funding their program in Pakistan, will it seriously affect Pakistan's economy or its budget? I guess not.
It is also important to note while the United States reimbursed $14.6 billion since 9/11, this amounts to only less than 12 percent of the total cost that Pakistan's economy suffered ($123 billion) during the last 16 years while fighting the war. Apart from a massive damage to the economy of Pakistan ($123 billion), the country also witnessed the loss of 70,000 Pakistani lives and over 5000 security personnel embraced Shahadat, thus far, in the war.
Pakistan has given enormous sacrifices, both in terms of men and material. Its people became more insecure in this war to make the world a safer place to live. We made sacrifices so as to enable the people of the Western World, particularly the United States to sleep in peace.
Should we blame Donald Trump or the US Administration for mischievous narratives or should we blame our leadership for not presenting the facts and figures to the international community? In my opinion, we should blame ourselves. None of our political leadership ever used the UN General Assembly Session to inform the world leaders about the sacrifices-both in terms of men and material-that we made to make the world a safer place. Never did any of the cabinet ministers present Pakistan's case before the international community. If we don't sell our narrative, how should the world appreciate the criticality our contribution to the peace? Naturally, the world would know the kind of narrative that the US administration has given to the it over the last one and a half decade. The statement of Donald Trump is an insult to our sacrifices. We have fought the war largely from our own resources. Can a poor country like Pakistan continue to fight the war on terror for sixteen long years?
The United States has maintained a transactional relationship with Pakistan all along. Changing goalposts frequently has been the norm since 9/11. The Haqqani Network in Washington DC (a la Hussain Haqqani) has been very active since 2008. A highly anti-Pakistan narrative has been taken seriously by the US Administration. Even the current administration's foreign policy towards Pakistan is based on the Hudson Institute's report "A New U.S. Approach to Pakistan: Enforcing Aid Conditions without Cutting Ties", February 2017, co-authored by Hussain Haqqani and Lisa Curtis. As long as the US continues to rely on the 'Haqqani network' in Washington, DC, the political and diplomatic relations between the two countries may not improve anytime soon.
It is pertinent to note that Pakistan's dependence on US financial and political support is relatively less today than at any time in the past. The emergence of China and the new Asian Financial Infrastructure have created alternative sources of development finance. An Asian developing country like Pakistan can tap development funding from several alternative sources from Asia, if need arises. The Chinese Development Bank itself has emerged as a major source of development funding.
The recent decision of Pakistan's Central Bank to use Chinese Currency Yuan for the settlement of bilateral trade and investment between China and Pakistan is a major development. This has also opened the opportunities for Pakistan to float Yuan-denominated bond in China. The resource so generated can be utilized for financing trade with China, thereby reducing the need for other hard currency.
At the end, let me summarize by stating that economic assistance from the United States is of little significance for Pakistan. Emergence of alternative sources of development finance in Asia has reduced the dependence of Asian developing country like Pakistan on the World Bank.
Pakistan nonetheless would like to maintain a friendly relationship with the US with dignity. US will always need Pakistan to bring peace and stability in Afghanistan. Hence, both countries need each other. It is, therefore, in the interest of the US to keep itself away from the outdated narrative of the 'Haqqani network' in Washington, D.C.
The writer is Principal and Dean at NUST School of Social Sciences & Humanities, Islamabad, Email: [email protected]
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Program FY 2002 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Total
FY 2011
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Total Security Related Assistance 5710 849 361 371 343 322 7956
Economic Assistance 7556 1067 834 608 561 226 10852
Coalition Support Fund (Reimbursement) 8881 688 1438 1198 700 550 14573
Grand Total 22147 2604 2633 2177 1604 1098 33381
Non- CSF 13266 1916 1195 979 904 548 18808
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Source: Department of State, Defense, Agriculture and USAID