US in bad mood for PAKISTAN- Effects of financial Aid cut on PAK 

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The US President Donald Trump tweeted on 1st Jan 2018 that

“United States has foolishly given Pakistan more than 33 billion dollars in aid over the last 15 years, and they have given us nothing but lies & deceit”


He also alleged that Pakistan harboured terrorists.

Consequently, on January 4th, the United States, announced that it will suspend most of its security assistance to Pakistan, unless Pakistan takes “decisive action” against the Taliban and Haqqani network, these are the militant groups blamed for stoking violence in Afghanistan and prolonging a conflict which has been America’s longest war.

It is believed that the total impact of the visible aid suspension may fall in the range of more than $900m.

Further, the State announced that it had placed Pakistan on a “watch list” of countries seen as failing to protect religious freedom. This is a complete indicator of deteriorating US-Pakistan relations and waning US patience.

However, Pakistan’s Prime Minister, Shahid Khaqan Abbasi, trying to display negligence, remarked that, US financial assistance was “very, very insignificant” and that Pakistan was “on the forefront of the war on terror”.

US-PAKISTAN: A Transactional Relationship


The relationship between these 2 countries started with the need of US for Pakistan’s nuclear program, being the time of the cold war nuclear could have proved to be a game changer. With this, Pakistan was the only way for US to have an entrance in mid Asia and being at lead for super powers.

The relationship between US and Pakistan were improved during the Presidency of Jimmy Carter owing to Pakistan’s nuclear program and the execution of PM Zulfikar Ali Bhutto in April 1979 by President, General Muhammad Zia-ul-Haq.

Meanwhile, Soviet Union had conveniently stepped-in to help stage a coup in Afghanistan, in which President Hafizullah Amin was killed and Soviet loyalist Babrak Karmal from a rival faction was installed as the President in December 1979.

President Carter thought that with the Islamic Revolution in Iran in 1979 and Soviet troop’s deployment in Afghanistan, it was vital to “repair relationships with Pakistan.”

President Carter became convinced by mid-1979 that the Soviets were going to invade Afghanistan and hence, without considering any future problems, joined hands with Pakistan to support the mujahedeen that he felt could be an effective way to counter Soviet aspirations to gain control over Central Asia.

The Soviet-Afghan War lasted over nine years, from December 1979 to February 1989. United States and Pakistan provided tacit support to the insurgent groups that fought a guerrilla war against the Soviet Army and the Democratic Republic of Afghanistan.

It is estimated that between 562,000 and 2,000,000 civilians were killed and millions of Afghans fled the country as refugees, mostly to Pakistan and Iran.


Taliban was a creation of the Pakistani intelligence agency (the ISI) but was funded by the US. The United States provided $3 billion to build this Islamic group and provided them with arms and ammunition, they did the biggest mistake of not keeping a track of them after the Soviet war.

The exit of Soviet Union from Afghanistan created a political void in the country. The Taliban continued to grow stronger as it received military support from Pakistan and financial support from Saudi Arabia.

In 1996, the Taliban captured the Afghan capital Kabul and established the Islamic Emirate of Afghanistan under the leadership of Mullah Mohammed Omar.

Though the Islamic State of Afghanistan government remained the internationally recognized government of Afghanistan under President Burhanuddin Rabbani, its physical jurisdiction was restricted to just 10% in the northern part of Afghanistan.


The monster that the US had created started to snarl back and gave them a formidable blow in the form of 9/11 (11th September 2001) that brazenly jolted them from their false sense of being invincible.

That attack killed 2,996 people, injured over 6,000 others, and caused at least $10 billion in infrastructure and property damage.

This catastrophe taught them an unforgettable lesson that you can never “run with the hare and hunt with the hounds”.

Hence, it brought the US back to Afghanistan, this time with a different agenda and they called it ‘war against terror’.

Once again United States required Pakistan to provide them with the administrative backup and facilities from where the coalition forces could operate.


The United States began providing economic assistance and military aid to Pakistan shortly after the country’s creation in 1947. In total, the United States obligated nearly $67 billion to Pakistan between 1951 and 2011.

The period between 2002 and 2009, only 30 percent of US foreign assistance to Pakistan was appropriated for economic-related needs; the remaining 70 percent was allocated to security-related assistance.

Hence, to insulate the development agenda from geopolitical and military events and facilitate longer-term planning for development, a bill called the Kerry-Lugar-Berman Bill was introduced into the US Congress.


In 2009, the US Congress approved the Enhanced Partnership for Pakistan Act (commonly known as the Kerry-Lugar-Berman bill, or KLB) signaling a renewed commitment to their trusted ally, Pakistan.

The act authorized a tripling of US economic and development-related assistance to Pakistan, or $7.5 billion over five years (FY2010 to FY2014), to improve Pakistan’s governance, support its economic growth, and invest in its people.


Foreign aid to Pakistan, after the US headed coalition launched its ‘war against terror’ in Afghanistan, is mostly from the ‘Coalition Support Fund’ which is given to Pakistan for expenses which already incurred and for compensation of facilities made available to the coalition forces such as the Shamsi Airfield and Dalbandin air bases by Pakistan.

Pakistan is one of the largest recipients of the Coalition Support Fund (CSF), having received US$ 14 Billion since 2002. Pakistan was authorized to receive up to US $900 million under CSF during the fiscal year 2016.


The US-Pak relationship has always been transactional and can be best defined as marriage of convenience. The recent times have seen mutual mistrust created up and the two countries are beginning to drift apart.

Pakistan’s continued support for resurgent militant groups that are hostile to the United States, coupled with continued improvement in US military and business relations with India, has resulted in Islamabad’s diminished strategic importance as an ally to Washington.


• American civilian and military aid to Pakistan, once the third-largest recipient of US foreign assistance, was less than $1 billion in 2016, down from a recent peak of more than $3.5 billion in 2011.

• In March 2016, Republican Senator Bob Corker, Chairman of the Senate Foreign Relations Committee, sought to prevent $430 million in US funding for Islamabad’s purchase of $700 million of Lockheed Martin Corp F-16 fighter jets.

• In August 2016, the then Secretary of Defence Ash Carter refused to authorize $300 million in military reimbursements to Pakistan.

• The Trump administration proposed to covert the $100 million in foreign military funding to Pakistan for the current financial year into a loan rather than an aid.

• On 21 July 2017, the United States of America decided to block the disbursement of USD 350 million aid in ‘Coalition Support Fund’ to Pakistan.

• In the most recent development, Trump administration is proposing to suspend $255m due to Pakistan for military equipment and training under the Foreign Military Financing (FMF) fund, and $700m under the Coalition Support Fund (CSF), which is paid to Pakistan for conducting operations against militant groups during 2018.

Implications of UNITED STATES Move to CUT AID to PAKISTAN:

In a report from the US Embassy in Islamabad, up to 70 percent of the funds given to the Pakistani military to support activities along the Afghanistan/Pakistan border have been misspent, and much has apparently been diverted to bolster Pakistan’s arsenal against India.

Considering the above, cutting of aid to Pakistan is a welcome news for India, as Pakistan will be economically restrained in its efforts to foment trouble in Kashmir.

It is unlikely, that Pakistan will retaliate very drastically to the US move by shutting overland access of US supplies to Kabul as it could lead to suspension of all ties with US.

Moreover, US could block even the development funding to Pakistan and could remove Pakistan from its list of major non-Nato allies, designate it as a state sponsor of terrorism, or work with India and Afghanistan to more aggressively counter its interests in the region.Besides, United States has other options for supplying its troops in Afghanistan, such as enhancing its military presence in Turkmenistan.


China is all set to move in to replace the US where ever it can to define the new world order, e.g. Africa, Central Asia, etc. Though, its foreign aid budget is about 1/4 of that of the US, but for a country like Pakistan from whom multiple gains are expected, it can always make an exception to the rule.

China has already made serious inroads into Pakistan. It has invested nearly $ 50 billion to create ports, rail transportation, and energy generation as part of CPEC in Pakistan and more recently, a new development deal worth $60 billion for infrastructure and energy projects till 2030 has been sealed between Pakistan and China.

In another noteworthy development, the State Bank of Pakistan on 02 January 2018 stated, that “Chinese Yuan (CNY) is an approved foreign currency for denominating foreign currency transactions in Pakistan.” In other words, Pakistan and China would be able to replace the US dollar for transactions in China Pakistan Economic Corridor (CPEC) projects.


A closer China-Pakistan can have serious military ramifications for India. Beijing is currently waging a full scale psychological warfare against India by displaying aggression in the North East, especially Arunachal Pradesh. It is primarily testing the military gumption and political will of India.

India must be prepared for an increased Kashmir interference by China due to its investments in the ‘One Belt One Road’ project that cuts across Pakistan-held J&K.

Chinese military presence in this area has been slowly growing, including near the Line of Control. India now faces Chinese troops on both flanks of its portion of J&K and a deepening China-Pakistan nexus presents India with a two-front theatre in the event of a war with either country.