Foreign aid, basic facts
One factor which has perhaps caused the havoc with our economy, and I claim to be no economist although I studied some economics both in my M A in Fletcher and for credits to my PhD political science, is dependence on foreign aid. Much is discussed about its basic facts. It seems that while we shower abuses on the former rulers- non democratic as they are alleged, they were, we do not have any knowledge about the basic facts of Pakistan’s Foreign Aid. I had gathered informally some figures about economic aid in various eras which I am presenting here for correction by those who know better and I do not claim to be one.
American writers, I do not know what is the basis of their claim,- and I contradicted one such experts long ago by a letter to him but received no reply to it - claim that Quaid e Azam had sought $ 2 billion aid from America. I referred to the sources on which they based their claim, Mir Laiq Ali’s book M A JINNAH , in our National Library “ Reminiscences of the Quaid”. The American writer/writers had claimed that the Quaid has sought $ 2 billion aid from US. My objection to that claim were that “billion” had not come in use in those days , million was in vogue, and second, that Quaid could not have asked for Pakistan this amount which was the Marshall Aid- Marshall was the name of Secretary of State at that time- for reconstruction of World War II devastated Europe. It was which my fading memory shows it was $ 2 or 2.5 billion. Building devastated Europe was a huge gigantic task and Pakistan could not have either demanded or been so unrealistic as to seek such stupendous amount of aid
In Mir Laiq Ali’s book I found the following references to the need for Foreign aid right after Pakistan came into existence. I might add that at that time Pakistan did not have its own currency and was totally down and out as it has not received from India its share of the Reserve Bank of India funds which were to be given by India to us as our share in the division of assets of India.Pakistan was really poor, and the situation was dismal. We were still using Indian currency notes. This is what he says “ when I met Mr Jinnah in Karachi, he at the very start elaborated that Pakistan as a newly-born State, was in urgent need of finances both internally as well as in foreign exchange .. He said Pakistan would accept any reasonable terms and offer “quid pro quo” short of affecting its hard earned sovereignty”… ( p 69) and then later at p 70 he says “ Soon after that the Nizam” ( of Hyderabad) “ sanctioned a loan of Rs 20 crores to Pakistan . Mr Jinnah lost no time in publicly announcing that Pakistan had received a loan of that sum from Hyderabad and that Pakistan had no further financial problem” Imagine Rs 20 crores were enough to meet Pakistan’s needs. Incidentally the last budget of Government of India was of Rs 70 crores.
That dismisses the American wrters clam that Q-i-A wanted a loan of $ 2 billion. ( $ was Rs 3 and some annas then) The came Korean War boom and Pakistan had surplus balance of trade and its budgets were in surplus as Liaquat claimed in US ( see Pakistan: Heart of Asia- Harvard University Press 1951, collection of Liaquat’s speeches in US in 1950). With his claims of surplus budgets and favourable balance of trade with dollar area etc.
However, Pakistan’s financial situation improved tremendously in post Korea war boom and Pakistan has huge balances of sterling balances and free Sterling balance of payment as stated elsewhere. When the Quid died Pakistan was under debt to none, when Liaquat died Pakistan had no foreign loans. To cut the story short up to 1953 we entered into no foreign aid or loans. I would request any better informed person to correct my information as stated below.
From 1954 onwards Pakistan’s foreign aid went up and up, from zero to today it stands at $ 87 billion . Foreign Aid in Ayub era, was $ 6 billion dollar was equal to Rs 5/30 , Zia ul Haq era it was $ 12 billion dollar parity from Rs.. 7 to Rs 19. , Benazir era – Musharruf era $ 48 billion $ parity … and now Zardari era it is $ 87 billion with dollar parity at Rs 88.60. Please correct my unofficial figures which will be most welcome. I do not recall rate of exchange during Benazir era.
The Aid took uglier shape since mid fifties, when aid was sought for “budget support” not for generating economy through such projects as dams, mills, setting industries, buying railways engines, renewing rail tracks, etc.but for “Budget support” Now donors became partners in funding the budget. This aid was sought for the political leaders to love beyond their means as bribes to win loyalties of politicians. Donors thus acquired control over the Government spending. No money, no budget for winning political support inside the country by the rulers. This was a shameful begging for purposes of political bribing.
Sensible use of aid would have been to use it for buying machinery and equipment for development purposes, to generate funds and return the loans from the income thus generated , like an individual does with the bank loans he takes. One can look at South Korea, which developed itself from the American ad and became an Asian Tiger, although much smaller than Pakistan and started development plans after Pakistan was known as a model for developing countries.
Many major Asian countries now called Asian tigers did it, Brazil did it, but we are sucking the Budget support lollypop . We are unique in this respect that we have experts, technical and experienced. And capable in every field but here the expert is on the margin and the illiterate politician is in the seat of authority. Is this the same situation in Japan, U K, Germany, and France and even in India?