Pakistan currently faces severe economic challenges, including low foreign reserves, a depreciating currency and high inflation of 38% as of June 2023. These issues have significant implications for poverty in the country. Aid to Pakistan has played a crucial role in addressing these economic difficulties and reducing poverty in the past. According to a congressional research service report from last month, Pakistan is experiencing a “[poly-crisis]” that encompasses politics, economy and security. These economic challenges not only hinder Pakistan’s development but also contribute to deepening poverty levels.
US Aid and its Impact on Poverty Alleviation in Pakistan
Historically, U.S. aid has alleviated poverty in Pakistan through various sectors such as health care, infrastructure development and agriculture. For instance, U.S. economic assistance in the 1960s supported the implementation of the “Green Revolution,” leading to higher-yielding varieties of crops like wheat and rice and improved agricultural productivity. This aid contributed to increased agricultural productivity, improved livelihoods and a subsequent reduction in poverty. GDP rate increased to 10.4 in 1965.
From 2002-2010, the U.S. provided significant financial assistance to Pakistan, primarily addressing terrorist threats and security concerns. This aid not only contributes to poverty reduction but also helps create jobs, stimulate economic growth and alleviate food insecurity.
Between 2001 and 2018, the poverty rate in Pakistan saw a significant decline, with more than 47 million Pakistanis lifting themselves out of poverty due to the expansion of off-farm economic opportunities and increased remittances. Aid to Pakistan has been a key driver of this positive change, contributing to poverty reduction and sustainable development. By increasing aid to Pakistan, the U.S. can fulfill its humanitarian obligations while also assisting in alleviating the deepening crisis within the country by fulfilling its commitment to goal 1 of U.N. SDGs like ‘Zero Poverty.’
The Borgen Project sought the expertise of Dr. Farhat Asif, an international affairs expert and founder of the Institute of Peace and Diplomatic Studies (IPDS), Islamabad. Dr. Asif highlighted how supporting an economically stable Pakistan aligns with U.S. foreign policy interests, particularly in terms of poverty alleviation and humanitarian commitments.
Supporting Pakistan aligns with American values of promoting economies on the brink of default and fostering democratic communities. Aid contributes to improving well-being, reducing poverty and enhancing access to health care, education and basic services.
One significant aspect Dr. Asif mentioned is that economic stability enables Pakistan to invest in modernizing its security infrastructure, enhancing intelligence capabilities and improving counter-terrorism capabilities. This not only counters extremist groups operating within Pakistan but also ensures regional stability. Counter-terrorism is a mutual interest between the U.S. and Pakistan and sustained U.S. support becomes crucial, especially when Pakistan lacks the financial stability to fund new security projects. A prosperous Pakistan indirectly helps the U.S. achieve its counter-terrorism goals and provides a secure environment for businesses.
Increase in FDI
A thriving economy fosters a safe business environment and attracts foreign direct investment (FDI). As per Dr Farhat, ‘’As Pakistan’s economic stability improves, it becomes an increasingly attractive market for U.S. businesses seeking to invest, benefiting both countries. FDI not only improves bilateral trade but also leads to job creation and contributes to poverty reduction. Aid plays a vital role in revitalizing economic stability and bringing certainty to the market.’’
The stability of Pakistan is crucial for regional security, considering its location in a volatile region with borders shared by Afghanistan, Iran and India. Instability within Pakistan could have spillover effects on neighboring countries and negatively impact regional security. By promoting economic stability through aid, internal conflicts can be reduced, peace can be fostered and overall regional stability can be achieved. Dr. Farhat explained that this is a significant concern for the U.S., as a stable Pakistan reduces the risk of conflicts escalating, provides a favorable environment for diplomatic engagement and negotiations and helps the U.S. address terrorism proliferation and critical regional issues such as border-fencing and the Afghan peace process.
Additionally, supporting Pakistan aligns with American liberal values of supporting economies on the brink of default and fostering democratic communities of peaceful coexistence. Aid can help stabilize and strengthen Pakistan’s economy, improving the well-being of its people, reducing poverty and enhancing access to health care, education and basic services. Aid becomes a moral imperative to assist Pakistan, considering its status as a foremost victim of terrorism. Supporting Pakistan’s development aligns with the United States’ commitment to SDGs like zero poverty.
History of US Aid to Pakistan
Throughout history, the U.S. has provided significant financial and military aid to Pakistan. The Kerry-Lugar-Berman Act passed in 2009 aimed to provide a long-term, civilian-focused assistance package of $7.5 billion to Pakistan, supporting economic development, education, health care and governance reforms. While security assistance was suspended in 2018 due to concerns, recent years have seen renewed engagement and assistance between the U.S. and Pakistan, particularly in economic cooperation, energy projects and education through organizations like USIP and USAID.
Notably, recent USAID programs like the Pakistan Reading Project (PRP), the Pakistan Agricultural Technology Transfer Activity (PATTA) and the Pakistan Regional Economic Integration Activity (PREIA) have aimed to improve education, agricultural productivity and trade competitiveness, respectively, contributing to Pakistan’s economic growth and stability.
The PRP, worth 164.7 million dollars was initiated in 2013 and ending in 2023, aims to improve the reading skills of 1.3 million children in grades one and two across Pakistan. It also supports teacher training, curriculum development, community engagement and policy reform to enhance the quality of early-grade education.
The PATTA program, an 8.2 million dollar project which started in 2017 and ended in 2021, aimed to increase smallholder farmers’ access to affordable, appropriate and effective agricultural technologies that could boost productivity and incomes. It also facilitated partnerships between local technology manufacturers, distributors and service providers to create a sustainable market for agricultural innovations. It helped 147,910 small farmers to adopt new technologies.
In addition, the PREIA program, implemented from 2015 to 2020, focused on enhancing Pakistan’s trade competitiveness and integration into regional and international markets. It supported policy reforms, trade facilitation, private sector engagement and women’s economic empowerment to foster economic growth and stability.
Lastly, since the 1950s through USAID to Pakistan, the Fulbright program, initiated in the 1950s, continues to offer fully funded opportunities for unprivileged Pakistani students to study in the U.S. The program has created a network of around 37,000 Fulbright Alumni working in various sectors in Pakistan.
Overall, aid to Pakistan plays a vital role in addressing economic challenges, reducing poverty and promoting sustainable development. By increasing aid, the U.S. can fulfill its humanitarian obligations, contribute to poverty alleviation and potentially advance its own strategic interests related to counter-terrorism, regional stability and promoting democratic values. The continued support of the U.S. through aid programs is crucial in helping Pakistan overcome its economic challenges, stimulate growth and improve the well-being of its people.
– Sarmad Wali Khan