Loan Commitments to Pakistan: How Will the Aid Be Used?

Loan Commitments to Pakistan: How Will the Aid Be Used?



In the aid conference organized by the United Nations and Pakistan in Geneva, more than ten billion dollars of loans and aid have been pledged for Pakistan. However, the question is how this aid will be used

Some critics are less optimistic about these loans. They claim that these loans are subject to IMF conditions, which will have disastrous effects on the country and the people.


When will the loan be received?


It is believed that these loans and grants will be available to Pakistan in the next three years. However, economic experts believe that if Pakistan does not do its homework on time, then this money may take time to come. According to former finance adviser Salman Shah, work in Pakistan is generally very slow in terms of projects, so it is possible that money will take time to come.


“If possible, there should be an up-front payment to Pakistan so that it can work for the rehabilitation of the flood victims as soon as possible, but because of the delay in government work, the arrival of this money will also be delayed.”


Former finance minister Miftah Ismail told DW, “The repayment period is three years, but it may take four to four and a half years.”

Foreign exchange reserves


Salman Shah further says that the influx of aid will increase the foreign exchange reserves, “There is no condition from the IMF or the donor countries as to where this money should be kept.” Of course, this money will come in the form of dollars or foreign currency, which will be kept in the State Bank. This will increase the foreign exchange reserves of Pakistan. Miftah Ismail says that Pakistan wanted eight billion dollars. But 10 billion dollars has been promised to Pakistan, so Pakistan’s foreign exchange reserves will definitely increase.



Will these foreign exchange reserves last?


Salman Shah says that the money will be used mostly for construction of roads, houses, bridges, buildings and other reconstruction projects. Then the aid or lending countries and institutions approve these projects and they insist that monitoring systems be established.


Salman Shah said that if the government has to import goods on a large scale, then the foreign exchange reserves will decrease. The feasibility report should also be prepared by the Pakistani firm while the equipment should also be from our own industries, if not, then reserves will be affected.




How Grants Are Used


Amir Hussain, an expert in the development sector from Islamabad, says that the grants that will be given by the US, UK or European countries will be used by their own institutions or NGOs. He told DW, “If the US gives a grant in Pakistan, it will probably be done through USAID or some other international NGO.” In the same way, Britain and European countries have their own institutions and NGOs.


According to Amir Hussain, even a small amount of the loan is used for training and education, “to improve the skills of the local staff.”

Potentially devastating effects


While some government and finance experts have a positive reaction to these loans and aid inflows, some economic experts are pointing out the hidden storm behind these loans. An economist from Karachi, Dr. Shahida Mozart, says that it should not be forgotten that these loans of more than 10 billion dollars are subject to the terms of the IMF and its program. “It’s not that it’s going to be easy, but we’re going to have to accept tough conditions from the IMF, the top of which is that we’re going to have to leave the dollar at the mercy of the market,” he told DW. , which means that the dollar will likely move to three hundred rupees while energy prices and interest rates will also have to rise. Which will bring a storm of inflation. Cost of production will skyrocket as interest rates rise and industries will collapse.”


It should be noted that Pakistan’s external debt is more than 130 billion dollars. Both Salman Shah and Shahida Ministry believe that it will increase further.




Who promised what?


On Monday, January 9, at the Geneva Conference, various countries and regional and international financial institutions announced these loans for the reconstruction and rehabilitation of flood-damaged areas of Pakistan. 2 billion dollars from the World Bank, 1.5 billion dollars from the Asian Development Bank, 500 million euros from the European Union, 380 million euros from France, 110 million from China and the United States. Dollars, 100 million dollars from USAID while 84 million euros have been promised by Germany. Apart from this, many other countries, including Japan, have also announced aid


This report is prepared from DW

Journalist Mufti Zia Qasmi

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