World Bank to double aid to Pakistan -- Will the money help?

Post by Milan Vaishnav*On June 1, the World Bank unveiled plans to dramatically ramp up its assistance to Pakistan. According to a new World Bank strategy paper, there are plans in the works to double lending to Pakistan over the next four years to as much as $6.5 billion. Will the money make a difference? Only if Pakistan's leadership tackles politically sensitive economy wide reforms. Minus $1 billion for reconstruction following the October 2005 earthquake, the vast majority of funds will be spent on a diverse array of development projects and programs ranging from health and education, to roads and railways, and electricity and telecommunications.There are very good reasons why the donor community should want to help Pakistan. As a new CGD volume, Short of the Goal argues, the developmental failures of low-income, poorly performing states like Pakistan can result in a multitude of transnational and regional security threats such as terrorism, criminal activity, and illicit trafficking. In addition, a recent CGD study finds that Pakistan faces an extreme social gap and lags well behind other countries with comparable levels of income across most social and human development indicators.Given the political imperative to "do something," the conventional wisdom has been to pour money on the problem. For over a decade, Pakistan has had almost bottomless credit from the World Bank and other donors to cure its poor record of economic development. Sadly, the country has little to show for it. And it appears now that the Bank is once again prepared to pull out its checkbook-in spite of the fact that a recent report (large file size) conducted by the Bank's own independent evaluation unit admits in painstaking detail the many failures of the Bank's massive investments in Pakistan during the 1990s.If the Bank insists on pushing ahead with a large new lending program, it would be wise to keep in mind two important lessons from its own recent experience. First, it will continue to be impossible to attack poverty in Pakistan without addressing the structures of economic and political power. Incremental programs, such as greater access to social services, can help people, but will not make a sustainable difference. A country strategy to attack poverty must include politically sensitive economy-wide economic reforms, and a focus on making government, including local government, more accountable to people, and hence, more democratic. Second, efforts to encourage improved development programs need to take into account the political, institutional and governance problems that are widespread in Pakistan. Given the grossly inadequate levels of public spending on development, encouraging increased expenditures makes sense-but only given at the same time improvements in the effectiveness of that spending, with a major focus on issues of demand and quality, and considerable attention to empowerment and participation of communities.Although the World Bank may have a historic soft spot for borrowers (including some with authoritarian leanings like Pakistani president General Pervez Musharraf) who can produce macro-economic stability and high growth rates, it must confront the reality of Pakistan's political economy. That does not mean the Bank should throw up its hand and concede defeat, but it does imply that the Bank must take a tough-love, hard-nosed approach that has been all too fleeting in the past but that could engender real results in the future.*Milan Vaishnav is a former research assistant at the Center for Global Development and is currently pursuing his PhD at Columbia University.