USAID cancellation — an opportunity in adversity?

On his first day in office, President Trump signed an Executive Order that put on hold for 90 days all USAID and State Department programmes. In these 90 days all programmes would be reviewed and a decision made to cancel them, keep them running, or change them to better align with President Trump's priorities. The decision affected activities around the globe worth USD 44 billion for 20,000 activities covering all sectors including fighting global hunger, disease, and human rights abuses.

Legal battles are underway in the US courts about President Trump's Executive Order regarding USAID, as well as some of his other orders. Whatever the outcome of these battles, it is probable that US developmental and humanitarian assistance to developing countries will decrease drastically.

For Pakistan, USAID has been a key partner over many decades. It has provided support for some of the major infrastructure of the country including Mangla, Warsak and Tarbela Dams. It provided over half a billion dollars after the 2005 earthquake and the 2010 floods; trained tens of thousands of teachers; funded thousands of scholarships, and financed academic and research institutes in places such as Faisalabad and the Institute of Business Administration in Karachi.

The ongoing USAID programme in Pakistan is estimated at USD 845 million and includes activities across various sectors including energy, economic development, agriculture, governance, education, health and humanitarian aid. All these have now been stopped and staff have been terminated or put on leave. The websites of USAID in Pakistan have been switched off.

So what are the implications of this drastic stop?

Clearly the cancellation of USAID funded activities will have a major and immediate impact on the direct beneficiaries of these projects, many of who are poor and vulnerable. Cancellation will also have an adverse impact on the many indirect beneficiaries of USAID projects. These include national staff working in USAID offices and projects; the various experts that provide consultancy services; and federal, provincial or local officials who are associated with these activities. Finally, cancellation will reduce fiscal space and further tighten the already precarious balance of payments situation.

However, these disruptions, unpleasant as they will be for those affected, will most likely not have any major social, political or economic implications.

In Pakistan, the poor and vulnerable are usually powerless and voiceless, with little sense of entitlement. They are grateful for any assistance that reaches them. If this stops, they may feel resentful and betrayed but this is unlikely to lead to any protest or other concrete actions.

As for the indirect beneficiaries - staff, consultants and others - many may find work with other traditional donors such as the EU, major bilaterals or the multilateral development banks that offer similar working conditions and compensation packages as USAID. Those that do not find alternative employment will face economic disruption and there will be ill will, particularly for the sudden and drastic manner in which the cuts were made. However, this too will unlikely lead to much, apart from grumbling and irritation in the drawing rooms of Islamabad, Lahore or Karachi.

Another issue is whether the suspension will have any significant impact on the overall growth rate of the country, or on other macroeconomic variables. Several cross-country studies, as well as time series studies for Pakistan, do not show any robust positive relationship between growth and the amount of aid received. While these studies may not be definitive due to problems with data and methodological complexities, it does suggest that suspension of the less than $1 billion of USAID money will not drastically change Pakistan's overall economic performance.

The situation may of course change if the US also pulls out of institutions that provide not only financing but also technical skills and access to international best practices - institutions such as the multilateral development banks, or the technical agencies of the UN such as the Food and Agriculture Organization.

So much for the possible negative effects; but could there be any positive consequences?

It has be often been stated that Pakistan has come to rely excessively on donor assistance. Their financial support has allowed Government to avoid much-needed structural and institutional reforms.

It has also been argued that through their staff and consultants, donors have undue influence in areas such as research, education and, in particular, preparation of key policy and strategy documents. This results in adoption of development pathways that are neo-liberal and globalist, and are unsuitable for Pakistan in its present stage of development.

Furthermore, it has also been stated that the generous salaries and benefits offered by donor projects in Pakistan absorb the best and the brightest, enticing them away from the national public and private sector - a type of brain drain within national borders.

If the above arguments are true, maybe the cutoff of US assistance could be a turning point. Maybe it would lead to Government undertaking key structural reforms; developing policies and strategies more suitable for Pakistan needs; and increasing the supply of high-level skills and talent in the domestic market.

Whatever the outcome of this particular disruption, we have to realise that we are living in turbulent times. To survive and prosper, we have to learn to adapt and adjust in a smart and timely manner. Much of the responsibility for this depends on Government, intellectuals and opinion-makers, on political and civil society leaders, and on the press. We all need to learn to work better and harder.