DfID-Pakistan Partnership

Pakistan currently ranks in the bottom 20 of the 144 economies around the world, according to the Global Economic Forum’s Global Competitiveness Report 2012-13. Sixty million Pakistanis, or one-third of the country’s rapidly growing population, continue to live below the poverty line. Pakistan’s economic growth rate, estimated at 3.67 percent, remains insufficient to generate jobs and contribute to poverty reduction. Pakistan lags behind its commitment under the Millennium Development Goals, particularly in the areas of education and health. Half of all Pakistani men and two-thirds of all women are illiterate. Insufficient primary care remains another major obstacle: one in 11 children die before their 5th birthday and 14,000 mothers die in childbirth annually. Natural disasters also represent an obstacle to poverty alleviation and economic growth. In 2010, strong rains caused flooding across the country and put 14 million people in need of assistance. The Asian Development Bank and World Bank estimate that recovery and reconstruction following the storm will require $10 billion. In addition to its socio-economic problems, Pakistan suffers from troubled foreign relations with the United States and other regional tensions which jeopardize the country’s longer-term development. Pakistan’s association with Islamic terrorism, an unstable and porous border with Afghanistan, and tense relations with India are some of the more prominent geopolitical risks facing the South Asian country. The United Kingdom is currently the fourth-largest donor to Pakistan. The Department for International Development has identified Pakistan as a priority country — a move that can be traced to U.K. national security interests as well as the large Pakistani population residing in the United Kingdom. By 2015, Pakistan will receive the largest chunk of U.K. aid — 1.4 billion pounds, up 107 percent from 2010. DfID appears to be taking a long-term approach in its commitment to Pakistan by investing in education, primary health, domestic and cross-border security, and economic growth. Funding levels Currently, Pakistan is the third-largest recipient of U.K. aid. The U.K. aid commitment to Pakistan increased from 100 million pounds ($160.1 million) in 2009 to almost 270 million pounds ($432.2 million) in 2012. Total aid is expected to reach 450 million pounds ($720.3 million) by 2015. For fiscal years 2010-11 to 2014-15, DfID has allocated 1.6 billion pounds ($2.5 billion) in assistance to Pakistan. The department’s spending averages 320 million pounds ($512.2 million) per fiscal year and is set to increase significantly each fiscal year. *Foreign Exchange Rate as of September 11, 2012: £1.60 = $1.00 DfID channels its aid to Pakistan through various instruments and works in close collaboration with the U.S. Agency for International Development and international donor agencies on program design and delivery. The agency provides budget support to strengthen the country’s public financial systems. In scenarios in which DfID deems budget support ineffective, the agency channels aid through traditional instruments like contributing funds to multilateral organizations and implementing partners. Funding priorities DfID’s engagement in Pakistan targets six key areas: (1) wealth creation, (2) governance and security, particularly in the border areas, (3) education, particularly for women, (4) improving primary health services, (5) reducing poverty, hunger and vulnerability, and (6) providing swift humanitarian assistance during natural disasters. The agency’s focus on education, which receives the largest portion of funding, is predicated on the sector’s capability to empower and transform the growing Pakistani population, and improve the situation of women in the country. Although the health sector receives the third largest share of the budget, it excludes funding for specific diseases like AIDS and malaria in Pakistan, which are being addressed by the Global Fund for AIDS, Tuberculosis and Malaria. Geographically, within Pakistan, aid operations center on Punjab and Khyber Pakhtunkwha provinces which account for 70 percent of Pakistan’s population and are regularly subjected to attacks by Islamic extremist groups, including the Taliban. The two largest operational DfID projects in Pakistan are the Khyber Pukhtunkhwa Education Sector Program (204 million pounds) and the Humanitarian Assistance in Response to Pakistan Floods 2010 (123 million pounds). Devex analysis With private investments of 1.6 billion pounds, the United Kingdom is currently Pakistan’s second-largest foreign investor. Under the Trade and Investment Roadmap, signed jointly by the United Kingdom and Pakistani government in May 2012, investments are slated to increase to 2.5 billion pounds by 2015 and are driven largely by the growing Pakistani population and the country’s strategic proximity to the fast-growing markets of India and China, as well as the resource-rich economies of Central Asia. Analysts assert that long-term U.K. assistance to Pakistan is intended to reduce large-scale illegal migration to the United Kingdom — a controversial diplomatic issue. The United Kingdom is home to the world’s largest Pakistani diaspora, and communities retain strong links with their homeland. Apart from aiming to transform the Pakistani population into a strong and dependable workforce, investments in education and health are aimed at removing the root causes of radical Islam and strengthening the country’s democracy which will promote domestic and regional stability. While DfID’s current aid budget for Pakistan has doubled since 2009 and is expected to increase through 2015, the U.K. government’s focus on value for money and consolidation of development partners means that any further increase in aid beyond 2015 is likely contingent on the Pakistani government’s ability to address corruption, strengthen the country’s fragile democracy, and cooperate with U.K. and international authorities on counterterrorism. Contact DfID Pakistan British High Commission Diplomatic Enclave Islamabad Tel.: (92-51) 201-2000 Fax: (92-51) 201-2048