Slowdown in foreign aid inflow

Pakistan has received half of the $9.2 billion it expects to get in foreign economic assistance during the year, with less-than-anticipated inflows from China and the World Bank denting its estimate. In the eight months of the fiscal year so far, between July and February, China provided $576 million against an annual estimate of $3.1 billion. The World Bank has extended an amount of $713 million against the yearly estimate of $1.8 billion and with just four months left, Pakistan’s expected inflow is due to take a hit.



The main reason behind disbursements by China being less than expected has been due to delays in finalising financing agreements for infrastructure projects under the China-Pakistan Economic Corridor (CPEC) and this is a worrying sign. Pakistan has been touting the CPEC to be a game changer and has been portraying itself as the next big investment destination. The real test was not just to secure the agreement for the CPEC, but to lay the ground work for the various projects under it that could have actually resulted in increased opportunities for the economy. Meanwhile, China is undergoing an economic slowdown after years of substantial growth and wants to maximise its return on investment. Pakistan, on the other hand, has barely come out of its balance of payments crisis and has been unable to be completely transparent on finances surrounding the CPEC. Maybe that is because it is still negotiating financing agreements. With the security situation again taking a hit, Pakistan’s bargaining power in negotiating these agreements has also suffered.

The federal government can ill-afford to take its own sweet time in completing infrastructure projects. It has also done little to ensure that the provinces start utilising their budget surpluses to finance infrastructure projects. The CPEC is crucial for the Pakistani economy and delays in the projects that come under it can have long-lasting adverse impacts, including delays in foreign economic assistance flowing into the country. The government needs to be strong-willed about completing the different projects under CPEC and make headway quickly. Bureaucratic red tape and the snail’s pace of work have hindered enough projects already. Delays not only increase costs but also cast doubts over the country’s seriousness in pursuing important projects.

Published in The Express Tribune, March 31^st,  2016.

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