3. Article by ABID HUSSAIN
( a former operation adviser at the world bank )
• For decades, the
political and military
elite governing
Pakistan have followed
a beg and borrow
strategy for financing
government
expenditures, rather
than raising taxes
SINDH-MADREESATUL-ISLAM UNIVERSITY
4. In addition
In addition, this elite stole from these resources to benefit
themselves, and their family and friends. This financing strategy has
made Pakistan much more dependent on foreign grants and loans,
compared to other countries of similar size, endowment and level
of development. Foreign borrowings for bad projects and
programmes have mortgaged our future generations, while
excessive foreign grants have mortgaged our national sovereignty.
SINDH-MADREESATUL-ISLAM UNIVERSITY
5. Over The Last Two Decades
Pakistan has received close to $40
billion in foreign grants (mostly from
the UK and the US) and loans from
the World Bank, the International
Monetary Fund and the Asian
Development Bank.
As in all developing countries, the
impact of this aid on Pakistan’s socio-
economic development is directly
linked to Pakistan’s own performance
in respect of structural reforms and
the effectiveness of the current and
development spending by
government.
SINDH-MADREESATUL-ISLAM UNIVERSITY
6. • Around half foreign
assistance, roughly $20
billion, was for development
projects. Of this, around $10
billion has been put to good
use. These include Ghazi
Barotha Dam, national
highways, barrage
improvement efforts,
power-generation, pipelines,
ports, earthquake
reconstruction, banking-
sector reforms, micro-
finance and polio
eradication. These projects
have yielded visible and
lasting results.
SINDH-MADREESATUL-ISLAM UNIVERSITY
7. Financed Projects With Limited Impact.
• Another $10 billion in project aid has financed
projects with limited impact. These include
support for education and health, the water
sector, institution-building and access to
justice. Despite decades of donor support for
health and education, results have been
disappointing.
SINDH-MADREESATUL-ISLAM UNIVERSITY
8. While many of these
projects showed good
results in the short term-
a new school, additional
teachers, increase in
piped water-these
improvements were
short-lived. Within a few
years: the school
building deteriorated
and its toilets became
dysfunctional; new
Health Centres neither
had Doctors nor
medicines; new piped
water systems became
non-functional because
there was no money the
repair of pumps. SINDH-MADREESATUL-ISLAM UNIVERSITY
9. • Because of decades of
borrowings to finance
high fiscal deficits,
Pakistan now has one of
the highest interest
expense in the
developing world as
ratio of tax revenues.
• Pakistan’s economy is
stuck in a “low growth-
high inflation” trap and
Pakistan could soon
once again face a
foreign-exchange crisis.
SINDH-MADREESATUL-ISLAM UNIVERSITY
10. Reason For poor Impact Of Aid
• There are two key reasons for poor impact of
aid. First, poor performance by the
government itself
– One step forwards,
– two sideways
– three backward.
• There is no penalty within government for bad
borrowing decisions or poor project
implementation.
SINDH-MADREESATUL-ISLAM UNIVERSITY
11. SOLUTION
• Pakistan needs a new aid strategy.
• First, Pakistan must get out of its shameful
begging behaviour. Addiction to aid has
become opium for the country.
• Second, aid effectiveness must be improved
so the country does not incur foreign debt
with no benefits to the economy or ordinary
citizens.
SINDH-MADREESATUL-ISLAM UNIVERSITY
12. Graph Represnt The Borrow Rate From
1995 To Date
SINDH-MADREESATUL-ISLAM UNIVERSITY