Economic Incentives of United States Are Worth to Make Allies with Pakistan

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Economic incentives of United States are worth to make allies with Pakistan By: Sadia Shamim
May 2011

The recent line of events has stained the US-Pakistan relationships, putting both countries’ position in a shadow. In such a controversial period of time, with diverse views around the globe, my assertions portray the alliance of United States to be significant for Pakistan throughout history. US haven’t used Pakistan as a client but have proved to be economically beneficial for the country. To prove my claim, this paper provides information on US aid, economic assistance to Pakistan, including the use of economic foreign policy and direct budget support to enhance Pakistan’s macroeconomic stability. Lastly, it discusses the positive role of the US in IMF, disbursing loans to Pakistan. Starting with a glance on the historical relationship, the amount of aid provided by the US to Pakistan has been tremendous. The aid provided in 2001 was nearly $ 5 million. This aid boosted on to 1.1 billion in 2002. (US News and World Report, 6/2/2003). In 2003, the US rewarded Pakistan for their performance in the war against terror. Ahmad Rashid talks about the colossal amount of aid granted by the US in his book, ‘Descent into Chaos: The United States and the Failure of Nation Building in Pakistan, Afghanistan, and Central Asia’, stating, “Bush announces the US will now cancel $1 billion of Pakistan’s US debt, reschedule the remaining $1.8 billion, and give $100 million for education reform.”(Rashid, 2008, PP.148-149) Furthermore, in 2008, the U.S. Ambassador to Pakistan Anne W. Patterson showed an inclination towards assisting Pakistan’s democratic government in the areas of development, stability, and security. Non-military assistance to Pakistan has increased considerably to Pakistan under the Obama Administration, which is mainly attributable to the Kerry-Lugar-Berman bill which grants $7.5 billion to Pakistan in five years beginning 2009.Post 9 /11, Pakistan has received $6 billion as civilian assistance, most of which $4.7 billion is under the category of Economic Support Fund. $ 1.6 billion funds have been provided for direct budget support of the government and debt relief in times of economic hardships and political strains associated with Pakistan’s participation in global war on terror. (US Government Accountability Office, 2010) Hence, around a total of more than $20.7 billion post 9/11, according to the data compiled from information received from the Departments of Defence, State and Agriculture and US Agency for International Development has been granted to Pakistan by the US so far. Such a considerable amount, though granted to Pakistan to fight the war against terror, in support of the US, is a lump sum injection into the economy of the country, broadening its base. Thus, it proves the essentiality of the US presence as an ally for Pakistan.

The paper now focuses on the tangible role played by the United States in uplifting the Pakistan economy, via the economic benefits attained by Pakistan because of the US incentives. One of the many important economic benefits included the inception of free trade for the country, followed by a help to enhance state’s sovereignty and lastly, granting Pakistan with military preparedness, developmental funds and aid, which includes the role of USAID. Pakistan actuated itself as part of globalization and free trade when United States agreed to lower its tariffs and quota restrictions on Pakistani textile goods, specifically on imports of Pakistani cotton-yarn products. Pakistan, being a less developed country, depends largely on the revenues generated from exports of some of its goods. Textile goods accounts for top ten Pakistani commodities exported to the United States. The US government announced the reduction and suspension of import duties on textile and textile goods, manufactured in Pakistan. Moreover, US also allowed the entry of duty free Pakistani goods under the...
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