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US Aid to Pakistan reduced by $440 Million

The United States has reduced the USAID delivered to Pakistan under the Kerry Lugar Berman Act by another $440 million. The grant now amounts to $4.1 billion, while the initially promised amount under PEPA was $7.5 billion.

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The United States has made further reductions in the aid delivered to Pakistan, reducing it by $440 million as per the commitments made under the Kerry Lugar Berman Act. The current aid is $4.1 billion, which is slightly more than half of the total amount that was promised to Islamabad in 2010.

The aid was allocated to Pakistan under the Kerry Lugar Berman Act in 2009, and the decision to reduce this economic assistance was officially announced to the authorities in Islamabad after three weeks of Prime Minister Imran Khan’s official visit to Washington.

Aid Reduced by $440 Million

The aid was allocated to Pakistan under the Pakistan Enhanced Partnership Agreement (PEPA), signed in September 2010 to functionalize the Kerry Lugar Berman Act, passed by the US Congress in October 2009.

The agenda was to provide Pakistan a grant worth $7.5 billion over the course of five years. Sources from the Ministry of Economic Affairs, circulating across media revealed that PEPA, which was due to expire, was extended by Islamabad earlier this month with the objective of encouraging the disbursement of the remaining grant, worth $900 million.

However, after the PEPA agreement was signed between Pakistan and the US, the relations began to deteriorate, marred with mistrust, and this deterioration of ties also impacted the commitments and aid packages promised to Pakistan under the Kerry Lugar Act.

The sources noted that before the recent reductions, the disbursement under the Kerry Lugar Bergman act amounted to around $4.5 billion, which has now been reduced to $4.1 billion. However, the actual grant, alongside the off-budget disbursement amounted to a mere $3.2 billion.

Due to the strained nature of bilateral interactions, and the USAID’s heightened dependence on contractors to perform the job, there has been a marked decline in the on-budget support to Pakistan

Reports indicate that the United States Agency for International Development (USAID) apprised the federal government of the decision to reduce the aid on 1st July. This decision was taken in light of the overall review conducted by the Trump administration, and the assistance promised to Pakistan under PEPA by reduced by $440.2 million.

The sources from the Ministry of Economic Affairs noted that Pakistan is not the only country that has been subjected to the recent reductions in US aid. They stated that these reductions are in light of US President Donald Trump’s policy of reducing economic assistance provided to developing nations.

The KLB was orchestrated to invest in the economic infrastructure of Pakistan, especially in the field of energy and agriculture. It was aimed at aiding Pakistan’s recovery from the water and energy crisis, uplift the lives of the people, and enhance job opportunities from widespread economic growth.

Implications for USAID Projects

As per the documents issued by the US State Department, of the total $7.5 billion promised to Pakistan initially, Washington had committed to provide an amount of $3.5 billion for high impact, high visibility projects. $2 billion was allocated for humanitarian relief and social services, and the remaining $2 billion was aimed at building the capacity of governmental departments.

The sources from the Ministry of Economic Affairs revealed, that the reduction by $440.2 million is likely to have serious implications for the future projects undertaken by USAID across Pakistan. From the reduced $4.1 billion disbursement, Pakistan still has to use the aid worth $900 million.

The sources revealed that due to the slow pace of aid disbursement and utilization, it is likely that the USAID would be able to utilize the entire amount within a period of one year. Therefore, the federal government has extended its agreement with Washington further.

Read more: Imran Khan in US: Foreign Aid is a curse on Pakistan

Officials from the Economic Affairs Ministry noted that PEPA is one of the four agreements under which Washington provides non-military economic assistance to Pakistan. The total assistance promises in all the four aid programs from the US combined since 2001 amounts up to $8.2 billion, and the amount that has been disbursed so far stands at $6.6 billion.

Due to the strained nature of bilateral interactions, and the USAID’s heightened dependence on contractors to perform the job, there has been a marked decline in the on-budget support to Pakistan, which currently stands at less than one-fourth of the total civilian aid promised by Washington.

The funded projects of USAID are largely executed with the assistance of foreign organizations, and Pakistani officials believe that is the primary reason behind the wastage of funds, as the foreign organizations claim high administration fees. These foreign agencies are selected unilaterally by USAID to execute their projects.

The sources added that the Ministry of Economic Affairs is examining the proposal of undertaking regular reviews of the projects funded by the US; an initiative that has not been undertaken for several years.

The Office of the Inspector General of the US, also ordered a review of the aid assigned to Pakistan under the Kerry Lugar Berman Act. OIG Report 2015 concluded that the US has failed to achieve its long-term development goals in Pakistan due to the short-term political ambitions of the US State Department, which competed against the long-term agendas of the USAID.

The OIG Report of 2015 stated that around 30% of the funds awarded to Pakistan under PEPA did not meet their intended goals, while 55% of the funds only partially fulfilled their goals.

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