No bolt-hole for government

For a country that has already been mired by fiscal and food crises, it will be too hard to endure a funding crisis, as well.
Water catastrophe, which hit the country last month, has not only uprooted lives of 15 million people and scathed infrastructure, it will also pile up unprecedented economic challenges for the debt-laden country.
In the light of current damage, termed as worse than the earthquake in Haiti, the international communitys response so far has remained weak.
When the country needs hundreds of millions of dollars for immediate relief and billions more for rebuilding efforts, the world so far has extended $94.8 million assistance, including $10 million as a loan, according to the National Disaster Management Authority.
If history is any guide, and as many developed countries are already facing financial crises, it is quite likely that the major portion of foreign support, for flood victims, will arrive in the form of loans rather than aid.
Earthquake 2005 is a good case in point, as the country received $5.7 billion against the promised $6.2 billion, of which, donors deducted $2 billion for relief efforts and ancillary services provided, leaving behind $3.7 billion for infrastructural development.
The government therefore, had to chip in $1.5 billion in the funds pool to keep development activities on the move. On top of that, a major portion of pledges, nearly 60 percent were in the form of soft loans.
Amid mounting external debt after the country took refuge in under the IMF programme two years ago, this time it will be rather challenging for the government to afford more liabilities.
Besides, battered by inflation, the fiscally constrained country might also face higher deficit this year, as rising commodity prices in global markets and substantial damage to crops and infrastructure would increase the trade gap.
In a nutshell, all these negative externalities will dent economic growth and, in turn, slash the foreign reserves and the value of domestic currency.
And, if foreign governments and businesses pour money into projects, the government in Islamabad would probably lose control over development activities, which might further impede the pace of construction activities. Perhaps it is rightly said that more donor-ship leads to less ownership.