This past November, I had the honour of attending a speech by Pakistan Climate Change Minister Musadik Malik at the opening session of the Sustainable Development Policy Institute’s annual conference in Islamabad. The Minister was passionate about the unique effects of climate change on Pakistan; in particular, he spoke movingly of his visit to upper Sindh following the 2022 super floods, where he saw a little girl, perhaps 7 or 8 years old, unable to find so much as a glass of clean water for herself or her family. He recounted how painful it was for him to realise that, for all the resources of the state at his command, he had no way of getting that girl the water she needed.
Minister Malik’s comments were no doubt sincere, and indeed heart-rending. Yet as I listened one fact kept troubling me: with Pakistan’s development needs so acute – not just for clean water, but also for energy, health, nutrition, education, improved agricultural practices, and a variety of what should be other public goods – why then did Pakistan and the United States Agency for International Development, or USAID, return in 2019 no less than $600 million in development funds to the U.S. Treasury? These were monies appropriated for Pakistan by the U.S. Congress. Yet somehow, all their good intentions and all Pakistan’s needs notwithstanding, Pakistan and the U.S. simply could not find a way to spend these funds and had to give them back. How much clean water could those resources have provided for that little girl’s family, and for the hundreds of thousands of others who found themselves in similar straits after the flooding?
So great was the fear that some resources would be misused or wasted, and that the Agency would be criticised on Capitol Hill and by its own auditors, that we ourselves put up a phalanx of bureaucratic obstacles that made it nearly impossible to spend money quickly.
Here’s what happened. In October 2009, in an extraordinary gesture of faith in the future of the U.S.-Pakistan relationship, the U.S. Congress passed, and President Barack Obama signed into law, what became known as the Kerry-Lugar-Berman Act, or KLB, sponsored by then-Senator (and future Secretary of State) John Kerry, Senator Richard Lugar, and Congressman Howard Berman. KLB authorised the provision of up to $7.5 billion in development assistance to Pakistan over a five-year period (2010-2014). Sadly, however, Pakistan and the U.S. proved simply unable to spend all that money. In the end, only $4.5 billion was actually appropriated for Pakistan, and even that reduced amount proved too much to absorb. By 2019, with only $3.9 billion having been spent, other pressing needs for that money had emerged, and USAID de-obligated the remaining $600 million of KLB resources and sent it back to Washington for use elsewhere. This outcome can only be described as a tragic failure for Pakistan; why did it happen? As is often the case, there are multiple explanations.
As early as 2012, less than three years after KLB’s enactment, it had become apparent that it would be much more difficult to spend this money effectively than the members of Congress had imagined. By September of that year, a “pipeline” of over $2 billion in unspent KLB funds had already built up and was growing. I was therefore dispatched by USAID to Islamabad to find out why this was happening and what could be done about it. What I found can only be described as a stunning lack of urgency on the part of both governments. Three full years into KLB, both the U.S. and Pakistan had failed to produce basic documentation that would have allowed major infrastructure projects – big-ticket projects that could have absorbed major portions of that pipeline – to proceed. Instead, despite the best efforts of teams of U.S diplomats and Pakistani engineers, many of those projects were languishing. In Sindh, for example, more than two years after Secretary of State Hillary Rodham Clinton had come to Pakistan and promised the people of Jacobabad that USAID would find the construction of a new water system and of a state-of-the-art hospital, construction of those much-needed facilities was still not underway. Similarly, a grand plan announced in 2011 to build over 100 new schools in Sindh in locations safe from flooding had not gotten off the ground.
Some of these delays, I found, could be attributed to bureaucratic slowness on the Pakistani side. It often took, for example, a year or more to obtain approval of the Planning Commission Form-1, or (PC-1), the backbone of Pakistan’s development planning system, the completion of which was essential to allow any project to proceed. Yet this should not have been unexpected, and in any case, was little different from the host-country bureaucratic processes USAID worked with in many places in the world. What surprised me was that so much of the pipeline was clearly attributable to delays on the American side. USAID’s equivalent to the PC-1, Project Implementation Letter 1, also took months, if not years, to complete. Lawyers argued for months over approval of simple one-paragraph documents needed to add funds already budgeted to projects already approved and underway. Teams of accountants worked for weeks to scrutinise every voucher down to the very last rivet and nail to make sure that not one penny more than necessary would be paid. All of this meant that while no funds were being mis-spent, very few, if any, resources were being spent at all – and Pakistan’s urgent development needs remained unaddressed.
The fundamental reason for this, I believe, was an extraordinary excess of caution on the part of well-meaning but ultimately misguided USAID officials. So great was the fear that some resources would be misused or wasted, and that the Agency would be criticised on Capitol Hill and by its own auditors, that we ourselves put up a phalanx of bureaucratic obstacles that made it nearly impossible to spend money quickly.
Eventually, of course, significant amounts of KLB resources were spent to help Pakistan. A series of talented USAID Mission Directors and other senior officials recognised the problem and, with the encouragement of their colleagues in the State Department’s Assistance Office, did their best to power through these constraints. Through the determined efforts of USAID’s team of engineers and other technical experts, and with the full support and guidance of wise officials in the Government of Sindh committed to their province’s development, USAID and its partners ultimately did build the Jacobabad hospital and water system, as well as 106 new schools in Sindh that now serve some 50,000 students there.
Yet so much more could have been done, and done more quickly, had only our Pakistani colleagues and I found the courage and the wisdom to untie ourselves from our self-imposed bureaucratic knots and move funds more quickly. Pakistan didn’t need to lose that $600 million, to say nothing of the $3 billion in KLB resources that were authorised but never appropriated. And the people of Pakistan didn’t need to lose the benefits those resources could have provided.
There are important lessons for the future here. While the United States and virtually all other major international donors are rethinking and reshaping the ways in which they will interact with the developing world, it is all but certain that in the years to come, there will be some type of U.S-funded development program in Pakistan, not so much one of development assistance but rather one of development cooperation. This may look very different from the old USAID programs, and may include such relatively new tools as loan guarantees, blended finance, public-private partnerships, and high-level sector-based compacts between the two governments. But whatever shape this cooperation takes, Pakistan and the U.S. should both learn from the KLB experience and follow one basic principle: spend the money. Spend it carefully, only for the purposes intended, and with all appropriate safeguards in place. But spend it. That’s a principle Pakistan should follow in its dealings not just with the U.S., but in its relationships with all bilateral and multilateral donor organisations.
The writer was the Coordinator for Economic and Development Assistance at the U.S. Embassy in Pakistan from 2015 to 2018. He also served in Karachi as USAID’s Provincial Director for Sindh and Balochistan from 2013 to 2015.