Foreign aid: Shahbaz backtracks on a bold move

Two days after declaring his intentions about foreign aid, Sharif appears to be backtracking on his statement.

Chief Minister Punjab Shahbaz Sharif jumped on the populist pedestal and declared with much fanfare that the Government of Punjab would reject foreign aid to strengthen the nation’s sovereignty.

In a poll on The Express Tribune website 74 per cent of the respondents voted in favour of the proposition. Apparently there are votes to gain by taking a tough line, and breaking the begging bowl forever.

Imran Khan is another politician who has repeatedly stated that our dependence on foreign, particularly American aid has forced us to cede our sovereignty. Pakistan should reject American aid to regain our honour.

If only it was that simple.

Two days after declaring his intention to free Punjab from foreign aid, the chief minister appears to be backtracking on his statement. He has qualified his statement by adding that he was only referring to aid that comes with conditions. Aid from the World Bank (since when does World Bank aid come without conditions?), Asian Development Bank, friendly states such as China, Turkey and Saudi Arabia are more than welcome. Further, it was reported in this paper that the government of Punjab has decided to reject grants, but not loans!

Further, it appears that the government of Punjab hasn’t actually received any “American conditional aid” at all. Quite convenient to reject aid that wasn’t offered to begin with.

The role of foreign aid in the development of any country is a controversial subject. Many recognise its role in helping fill the savings gap of a developing state and spur investment so that the country can enter a self-sustaining growth cycle. Well, that’s the theory in practice; foreign aid is a form of political manipulation, an arm of foreign policy and an economic tool to open up new markets.

Across the Western world, money for foreign aid is drying up. The rise of centre-right political parties, pandering to their own form of populism, adopted both social and economically conservative policies in the wake of the 2008 global recession. To expect taxpayers in recession ridden, high unemployment economies to finance foreign aid without conditions to third world economies, is highly optimistic.

Now don’t get me wrong, I am all for freeing the country from the grips of foreign economic interests. I would argue that Pakistan should aggressively lobby existing trading partners to open up their markets to Pakistani exports and at the same time search out new opportunities in non-traditional markets.

However, the reality betrays the petty populism thrown about. Pakistan called for IMF support in 2008 as a last resort. The Friends of Pakistan pledges never really materialised. America increased scrutiny of Coalition Support Fund receipts. Global commodity prices went through the roof and Pakistan faced both, a balance of payments and a budgetary deficit. No one was willing to bail us out so we went to the IMF.

Our military remains the largest recipient of American aid. Our budget is financed by foreign receipts and the largest chunk of expenditure is allocated towards interest payments.

That’s the sad reality; no amount of sloganeering is going to change the relationship between Pakistan and its economic benefactors. Rather than making empty claims of rejecting foreign aid, then backtracking the very next day, the honourable chief minister should perhaps explain to the people of Punjab, how exactly he intends to repay the province’s overdraft with the State Bank of Pakistan (SBP). Rampant borrowing by the federal and provincial governments has helped to keep inflation in double figures.

To regain our economic sovereignty we need the people of Pakistan to bail the country out. To begin with, our state, at the federal and provincial level, must overcome its inability and unwillingness to tighten the noose around tax evaders.

It’s shameful that in a country with so much rhetoric on sovereignty and honour, the highest incidence of taxation is on those who are least able to pay it. Talk about sovereignty - the state is unable to tax agriculturalists and landlords, while the urban elite lobby for concessions, subsidies and exemptions. Indirect taxes unfairly burden the poor, who ultimately generate the tax revenues which service our debts.

Our sovereignty is in our hands. After all no one is forcing us to take the money.