'Failure to reform corruption put flood aid in jeopardy'

Britain warns that foreign aid donations to Pakistan have fallen far short of a UN target over corruption fears.

ISLAMABAD: Britain has warned Pakistan that its failure to reform its corrupt and wasteful government has put in jeopardy its chances of emerging as the biggest recipient of British foreign aid.

Foreign aid donations to Pakistan have fallen far short of a UN target over corruption fears. The country's officials have rebuffed efforts to ensure aid spending on recovery from the devastating floods it suffered in August is not tainted by corruption.

Andrew Mitchell, the International Development Secretary, is attending the Pakistan Development Forum in Islamabad on Monday and will demand four sweeping reforms across four sectors in return for continued growth in British aid payment.

If it follows through, Islamabad will be the “winner” from Britain's review of all its aid programmes, which will shift spending from China and Russia to Pakistan and conflict zones in Africa.

"Britain stands ready to increase its support to Pakistan as part of the aid review but this will be dependent on a commitment to put in place much-needed reforms," he said. "If Pakistan takes this opportunity to grasp the nettle of reform as it is starting to do, then it has the chance to come back stronger”.

But Pakistani officials rejected out of hand efforts by foreign countries to impose conditions on how it spends aid. "That is not acceptable," said Salman Siddique, the Finance Secretary.

Siddique said that Pakistan had already submitted a bill to introduce a VAT for the first time and had imposed a 10 per cent flood tax on the incomes of the wealthy. But even after the measures, Pakistan has one of the world's lowest tax takes, at just 10 per cent of GDP.

Mitchell is to demand a root and branch overhaul of the tax system, an overhaul of government spending to eliminate waste, a "transparent" system to dispense rebuilding aid free from political interference and a campaign to drive out corrupt officials.