Re: US plans "significant" Pakistan missile sale (merged)
NameInUse: I do not know if my understanding the news is wrong or yours.
Here is the news, confirming that there is no change in American promised financial support for Pakistan.
U.S. ambassador Ryan Crocker said there would be no cut to the full amount promised in 2003 -- $3 billion over five years up to 2009. "We are a democracy, Congress has its views, but I would like to make very clear that this administration is totally committed to providing the full amount," Crocker said following a signing ceremony for an agreement on $200 million in budgetary support.
Let compare it with news in Nation that you referred.
The House, while reducing by $250 million to $300 million of aid to Pakistan, talked of its failure “to do enough” to improve human rights, particularly the rights of women, democratic governance and the rule of law. By a 373-34 vote, it also slashed foreign military financing to Pakistan from the proposed $300 million to $200 million, registering a fall of 33 percent.
What is the background: The aid USA promised to Pakistan was $3 billions in 5 years. Half of that $3 billion is economical aid and half in military aid. That means economical aid of $1.5 billion and military aid of $1.5 billion. It comes to $300 million economical aid and $300 million military aid every year for next 5 years.
News in Nation (your reference): By a 373-34 vote, it also slashed foreign military financing to Pakistan from the proposed $300 million to $200 million, registering a fall of 33 percent.
News refered by Silly Billy*: U.S. ambassador Ryan Crocker said there would be no cut to the full amount promised in 2003 -- $3 billion over five years up to 2009.*
The above news confirms that there is no reduction in aid, negating Nation news. If aid is still $3 billion over 5 years ending in 2009 (as this arrangement started in 2004), it means that yearly aid is $600 million as usual and that means military aid is still $300 million a year and economical aid is still $300 million.
In Nation news: The House, while reducing by $250 million to $300 million of aid to Pakistan. <-What I can understand is that the news is referring to remaining military aid for coming years as Pakistan has already used up 2 years of aid. So if USA reduced military aid by $300 million then it would come to $100 million less military aid per year, reducing offered $300 million to $200 million, but that is also negated from the above news (aid amount is still $3 billion).
*.
Actually, from present news: Crocker said following a signing ceremony for an agreement on $200 million in budgetary support. <- It seems that apart of above aid, USA is also giving $200 million dollars as budgetary support (that could be grant or another loan concession).
Actually, aid is not grant but it is other name of soft loan. All what west call aid are actually loans. Normally economical part of this loan attracts very little interest rate and military part attracts very high interest rate. During Zia time, Pakistan received such aid and Pakistan took economical part of the aid but did not fully utilized military part of the aid. Other then aid (another name for soft loan, though sometime west write it off too), west also give grants though that is very rare.
Nevertheless, what I heard is that this recent $3 billion aid is not soft loan but is grant or is loan with no interest rate (I am not sure).
What I know, apart of these aid/grants, Pakistan is also charging USA for USA using Pakistan air space, airport, support services, intelligence services and land in their Afghanistan pursuit. What I remember, during earlier years (after 9/11), this was few hundred million dollars a month but after USA reduced Pakistan dependence as they started operating form Afghanistan, this amount went down.
[What I know, Pakistan is the first and only country that charged USA for USA keep using Pakistan airports and other services for their military].
Regardless, I think that Pakistan is no more that desperate to worry about aids. The days when Pakistan debt servicing, foreign trade deficit payments, budget deficit, all use to depend on aids are gone. With over $13 billion reserve that is not decreasing and increasing export, rupees stability and increasing remittance through proper channels, raising hard currency using international bonds, etc is good enough, better then relying on aids.
So, who cares even if USA decides to stop their aid? Though I have to admit that even such news may not effect today’s financially strong Pakistan, it do dishearten many ill-informed and innocent Pakistanis that have little understanding regarding aid, grants, loans and their impacts on country’s economics, rather many do not even understand difference between micro and macro economics of a country.
*For easy understanding, one thing to remember is that: *
A country that has few hundred million dollars reserve that can cover couple of weeks import, export of 7.6 billion dollars, has to pay hundreds of million dollars a month in debt servicing (actually 400 to 500 million dollars a month), uncomfortable still increasing foreign debt, foreign official remittance of around one billion dollars a year, depreciating currency, yearly 600 million dollars aid is a lot. [Pakistan situation was all these, rather worse when President Musharaf took over].
But for a country that has 13 billion dollar reserve that can cover 6 to 8 months import (remember, Pakistan import when Mush took power was less then 10 billion dollars), 18 billion dollar exports that is increasing fast, over 4 billion dollar official remittance that is increasing every year, stable rupees (over the last 5 years, Pak rupees is stable or gaining against the dollar), decreasing external debt and very fast decreasing external debt servicing requirement (around 300 to 350 million dollars a month), yearly 600 million dollars aid is not that important.*
