The recently-released yearbook on economic assistance serves yet another reminder that it is China – not the US – whose economic footprint is growing in Pakistan. Although the Economic Affairs Division’s said publication pertains to FY18, using it alongside past and more recent data identifies a pattern where Pakistan’s two main economic partners are becoming poles apart when it comes to helping this country develop. Perhaps PM Khan should gift this yearbook to Mr. Trump and correct the record.
From the top, the report shows that Pakistan received commitments worth $10.6 billion for FY18 from all types of financiers – bilateral, multilateral and commercial. In the end, actual disbursements were worth $11.5 billion, about 8 percent more than the commitments. (This figure reflects what the foreign countries and multilateral institutions spend through the Pakistani government. Funds they spend themselves are not part of this data).
Grants accounted for just 5 percent of the pie and the rest were all foreign loans. Indeed, there is no free lunch. Since it was mostly loans, commercial banks topped the chart, with 32 percent share in total disbursements. They were followed by multilateral donors (25% share), bond issuers (22 percent), and bilateral sources (21%). Over 60 percent of disbursements went to help government’s BOP worries. Less than 40 percent went towards project aid, which feeds into the federal and provincial PSDPs.
China led the top-five donors with $1.8 billion disbursed in FY18. The remaining funders were the Islamic Development Bank ($1 bn), Asian Development Bank ($0.9 bn), World Bank ($0.7 bn) and the UK ($0.2 bn). In actuality, China had an even bigger slice in the pie. Out of the $3.7 billion of Pakistan’s foreign commercial loans in FY18, roughly 60 percent had their origin in China. In effect, China accounted for 35 percent of Pakistan’s overall foreign assistance in FY18. And all of that Chinese assistance was in loans.
On the other hand, the United States disbursed Pakistan only $117 million in FY18. That’s just one percent of all the assistance that year. Some solace, as 100 percent American economic assistance was in the form of grant – just as it has been for the last many years.
In short, China and the US offer a contrast in how they are economically assisting Pakistan. China is aiding through loans, and these are big loans. Pakistan took $60 billion in foreign loans for economic purposes in the ten years between FY10 and 11MFY19 – China accounted for almost a fifth of that sum. Whereas the US assistance is through grants and these are not huge grants. But the US is the grant leader. Between FY10-11MFY19, US accounted for a third of Pakistan’s $5 billion in total grants.
In the end, it must be pointed out that the high concentration of loans in foreign assistance will continue to build up dollar-based debt-servicing pressures. As per the EAD, Pakistan had paid $5.8 billion on foreign debt servicing in FY18 – this amount is half of the total foreign economic assistance received that year. Grants should at least be 10 percent of overall foreign assistance. The 5 percent figure is not sustainable. However, it looks difficult that the US will come around with its big-dollar grants anytime soon. Perhaps negotiate better with China next time?
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