Tone-deaf: Islamabad pushes for more ‘mega-project’ financing from US

Islamabad wants US to begin financing ‘mega projects’ even though dozens of small projects are funded by the US govt.

ISLAMABAD:

Even as the United States announced a suspension of military aid to Pakistan, Islamabad is pushing Washington not only to continue its civilian aid programmes, but also to begin financing ‘mega projects’ as opposed to the dozens of small projects that are currently being funded by the US government.

“For early completion of the projects and making better use of the assistance, Washington needs to reconsider its approach and should allocate resources for mega projects,” said a finance ministry official on the condition of anonymity, as he was not authorised to speak to the media.

Government officials believe that many of the US-funded programmes – including some as small as $4 million – are not big enough to have a substantial impact on the Pakistani economy. Currently, the largest programme being financed by the US is $190 million for the Citizen Damages Compensation Programme, known locally as the Watan Cards programme for the 2010 flood victims.

Of the $1.5 billion in annual civilian financial assistance promised each year to Pakistan under the Kerry-Lugar Act passed by the United States Congress, the US government has so far only disbursed about $374 million. It had earlier committed to disbursing at least $718 million by June 30.

The United States Agency for International Development (USAID) has a portfolio of about $2 billion, of which $1 billion is for 32 Kerry-Lugar-funded projects.

The number of projects had initially been 55, but was consolidated downwards during a meeting between Pakistani and US officials in September 2010. Islamabad wants to continue moving that process forward.

The US government has already agreed to provide $500 million for the Diamer Bhasha dam, and the government is negotiating with the US to establish a five-year Pakistan Enterprises Fund to promote private American investment in small and medium-sized Pakistani businesses.

Finance Minister Abdul Hafeez Sheikh has admitted recently that allowing the US to determine which projects it wanted to fund was a mistake.

Yet despite the delays in disbursement and the suspension of $800 million in military aid, Pakistani government officials do not believe that there will be a suspension of civilian aid, at least in the short term. The US legislature has approved funding for Pakistan under the Kerry-Lugar Act for the US fiscal year ending September 30, 2012. A suspension of this funding would require another act of Congress which many officials in Islamabad view as unlikely.

US diplomats in Pakistan appear to echo that sentiment. “There is no change to US development assistance to Pakistan,” said US Embassy spokesperson Courtney Bale, drawing a contrast between civilian and military aid. “Coalition Support Funds are a reimbursement for expenditures in support of overseas contingency operations.”

Military aid is relatively easy to suspend for the US government since it is not appropriated separately from Congress, allowing the Obama administration more flexibility to disburse or suspend payments. However, even civilian assistance is contingent upon the US Secretary of State certifying that Pakistan remains democratic and makes progress in the war on terrorism.

The US government has frequently used the suspension of Coalition Support Fund (CSF) disbursement as a pressure tactic, withholding $600 million for the fiscal year ending June 30, 2011, which pushed up Pakistan’s budget deficit by 0.2 per cent of the total size of the economy.

Pakistan’s total outstanding CSF claims have reached about $3.4 billion, of which the US government has been able to reconcile $1.8 billion, but has not yet disbursed.





Published in The Express Tribune, July 12^th, 2011.