Aid or accounts payable?6 min read

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US will be reducing CSF or Coalition Support Fund. American aid is being reduced to Pakistan. The US refuses to provide support to Pakistan. These headlines have been flashing for years giving the impression that the American largesse or magnanimity is now reaching its limit; that Pakistan must do more to get aid from Americans; that this charity dole out by the Americans will no longer be available; that Pakistan needs to fulfill the ‘do more’ demands of the Americans to qualify for this generosity of pocket of the Americans; The whole image of the big superpower sick of dishing out taxpayer money to Pakistan in return for nothing is amazingly entrenched in the minds of people of the two countries and the international audience.

CSF proceeds have had a strange history. Traditionally, they have been perceived as aid and historically they have been used to cower down Pakistan by withholding them to pressurize obedience to American dictates. The very fact that the US has said that we are cutting down $300 million of CSF funds and thus have an upper hand as they will not dole out aid to Pakistan is itself a reflection of decades of a disastrous negotiation handling of the US/Pak joint collaboration in the war in Afghanistan. In a negotiation, each party has to see their strong points and stand on them. USAid-IMF-World Bank lending is tied to some conditions that they impose, and like all lenders, they have the right to demand terms in exchange.

However, CSF is neither aid, nor grant, nor loan. This is not money we owe to the US, this is money America owes to us. This is not a favour that US government is bestowing on us rather it is a favour that Pakistan was giving to America to fight its war in Afghanistan. These are accounts payable by US to Pakistan against unpaid service charges. These are defaults of payments against which advanced services were rendered. Unfortunately neither US nor Pakistan has ever portrayed it as anything but aid upon which the Pakistani government and military should be grateful about.


Almost half of US aid to Pakistan since 2002 has come as CSF payments and reimbursement for expenses incurred in support of US operations in Afghanistan. So far, Pakistan has received $13 billion in CSF payments with payments falling from $1 billion per year in 2014 to $700 million in 2015. Other security-related assistance has gone down from $1.2 billion in 2011 to $300 million 2017 and with the latest announcement, the suspension of $300 million that was already decided, is continuing, and thus not a new restriction.

Also Read: Foreign aid an impediment to growth

In economic assistance sense, it is senseless too. Pakistan Economic Survey for 2017-18 states that during the last 17 years, the direct and indirect cost incurred by Pakistan due to incidents of terrorism amounted to $126.79 billion equivalent to Rs10,762.64 billion. This along with the loss of 60000 military and civilian human lives is just inexplicable. Adding insult to injury is the fact that we have not only spent $113 billion more on this war than the aid we have been received, of those $13 billion “aid” from the US on account of CSF over $9 billion claims are still pending before the Trump administration.

Can a deal be that lopsided and lose-win? How did we enter into this conundrum? Why did the government not know that CSF is not aid and why did they not attempt to recover these funds or stop advancing services that were not only financially disastrous but costing us precious lives, increasing insecurity and draining our economy? These are questions that have very depressing answers as they point out towards the reality of the foreign affairs and the economy being in the hands of incompetent people who were there for other interests than national development. From General Musharraf’s justification that the US had threatened Pakistan that either you do what we tell you or you will be in stone-age, to Prime Minister Nawaz Sharif’s complete ignorance and refusal to deal with foreign affairs, this country has been an ideal tantrum dumping ground for Trump and his predecessors.

The way forward is not easy. For years, this impression has been created internally and externally that our economy has been dependent on US aid and our military has been dependent on CSF funds. This impression has created huge pressures on economic and foreign policy. Trump has been treating Pakistan as the chief terror creator in the region and threatening more aid cuts. Pakistan has to start an awareness and image building exercise both in the country and internationally. Domestically it is important that the public be informed that the US is indebted to us rather than Pakistan being indebted to them.

That of course raises the question of why Pakistani economy is reeling under debt if the US aid borrowing is just a small part of the whole debt mountain? The answer is that the fiscal policies have been disastrous. The budget deficit for last fiscal year was 4.3% of the GDP and the trade deficit is $37.7 billion i.e., the gap between imports and exports. When your expenditures are Rs 1.481 trillion more than your income then to bear these expenditures you need to borrow through IMF, Bonds, loans etc. That is why the crisis in the economy becomes the main reason for taking whatever comes your way in the form of money without understanding or calculating the longer term impact of reckless borrowing.

The solution to this misnomer of CSF classification as aid lies in a long-term campaign. But the direction can be set in the first 100 days. Firstly, a constant education of policymakers that it is a payment owed by the US to Pakistan. Secondly, a strategic calculation of the $ 9 billion of CSF reimbursements that US still owes to the country. Thirdly, a strategy to create awareness in the US and the lending agencies of how it is US who is defaulting on its reimbursement payments for services rendered.

Foreign Affairs are not dealt with in a linear chronological style and require more diplomacy and subtlety. Thus the abovementioned steps may take time and great sensitivity of handling. Therefore the focus on building mutual trust and mutual benefit should precede these strategies. However Rome was not built in a day and neither can a level playing field between America and Pakistan but the ultimate goal of restoring financial and political parity should govern every meeting, interaction and diplomatic initiative that Pakistan undertakes with the US in particular and as a foreign policy in general.

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(This news/article originally appeared in Business Recorder on September 10th, 2018)

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