Tokyo donors, KL programme: Enthusiasm dies down as world lenders fail to honour promises

So far $1.6b has been released out of $12.5b promised in 2009.

ISLAMABAD:

Pakistan has so far managed to get just $1.6 billion (12.8%) out of $12.5 billion pledged at the Tokyo donors conference and under the Kerry-Lugar Act, the two major international initiatives launched to support the country’s fragile economy and help it fight terrorism.

The assistance package of $5.1 billion offered in Tokyo for 2010 to 2013 is going to end next fiscal year. The Tokyo pledges had been made in April 2009 on the sidelines of the Friends of Democratic Pakistan forum, jointly organised by the World Bank and Japan.

According to budget documents, Pakistan has so far received less than $1.3 billion out of the total pledges of $5.1 billion made by nearly 30 countries and international lending agencies.

In the first year – 2010, the country received Rs95.7 billion while in the second year the amount dropped to only Rs13.7 billion. In the third year, it came down further to Rs5 billion. For the next financial year, the economic managers have estimated to receive only Rs1.1 billion or less than $10 million, indicating the donors’ conference could not achieve the desired results. The donors honoured only 25% of their pledges and most of these were loans.

Sources in the finance ministry said in the initial year the response was very encouraging, but due to trust deficit the donors started distancing themselves from the government, which is evident from the amount loaned in the previous three years.

Thanking the world leaders for offering ‘generous support’ to Pakistan, President Asif Ali Zardari, who had attended the Tokyo meeting, promised to use the money to “fight the tremendous challenge of extremism.” “If we lose, you lose. If we lose, the world loses,” he said at that time.

The US and Japan had pledged $1 billion each. The European Union promised $640 million over four years while Saudi Arabia pledged $700 million over two years. Saudi Arabia was the only country that fulfilled its pledge and gave the entire amount, largely loans. Iran also offered $300 million.

US assistance

While promising to address Pakistan’s grievances of the past, the Obama administration convinced the US Congress to pass a historical Kerry-Lugar Act in 2009, promising $7.5 billion in civilian assistance to Pakistan over five years. Of the total, $1.5 billion was to be released every year.

According to the budget documents, the country has received a meagre $340 million in two years. For the next year, it has budgeted less than $100 million, suggesting that the government has accepted the reality that it may not get maximum from the US at a time when their relations are at new lows. Ideally, in two years, Pakistan should have received $3 billion, but the amount is less than 12%.

However, the US claims that it has so far given over $1.5 billion, but Pakistan does not have record of the assistance spent outside the budget.

In the first year of implementation of the Kerry-Lugar programme in 2010-11, Pakistan received only Rs11 billion against estimates of Rs52 billion. In 2011-12, the government had budgeted to get Rs34.2 billion, but it received only Rs20.4 billion. For the next fiscal year, the government has projected to receive Rs8.2 billion.

Despite the marked slowdown in assistance and strained relations, both Pakistan and the US stress that civilian assistance would not be suspended this time.

After the 2010 floods, the European Union also took an initiative. It offered duty-free access to Pakistani export products for a period of three years. However, the announcement still remains on papers and in an effort to achieve consensus at the World Trade Organisation and the EU Parliament the period has already come down to one and a half years.

Published in The Express Tribune, June 10^th, 2012.