Pakistan warned, Reform or risk aid

www.telegraph.co.uk

Britain has warned Pakistan that its failure to reform its corrupt and wasteful government has put in jeopardy its chances of emerging as the biggest recipient of British foreign aid. Foreign aid donations to Pakistan have fallen far short of a UN target over corruption fears. The country's officials have rebuffed efforts to ensure aid spending on recovery from the devastating floods it suffered in August is not tainted by corruption.

A row over Pakistan's demands that aid payments are handed over to the government in cash is threating to derail efforts to raise billions of pounds to rebuild schools, roads, power plants and homes.

Andrew Mitchell, the International Development Secretary, is attending the Pakistan Development Forum in Islamabad on Monday and will demand four sweeping reforms across four sectors in return for continued growth in British aid payment.
Britain stands ready to increase its support to Pakistan as part of the aid review but this will be dependent on a commitment to put in place much-needed reforms," he said. "If Pakistan takes this opportunity to grasp the nettle of reform as it is starting to do, then it has the chance to come back stronger."

But Pakistani officials rejected out of hand efforts by foreign countries to impose conditions on how it spends aid. "That is not acceptable," said Salman Siddique, the Finance Secretary.

Mr Siddique said that Pakistan had already submitted a bill to introduce a VAT for the first time and had imposed a 10 per cent flood tax on the incomes of the wealthy. But even after the measures, Pakistan has one of the world's lowest tax takes at just 10 per cent of GDP.

Mr Mitchell is to demand a root and branch overhaul of the tax system, an overhaul of government spending to eliminate waste, a "transparent" system to dispense rebuilding aid free from political interference and a campaign to drive out corrupt officials.

Without a plan to radically shake up the bureaucracy, Pakistan is facing a humiliating blow to its efforts to finance the reconstruction of the flood ravaged economy.

Almost 2,000 people died and extensive damage was caused across a swathe of territory the size of England. A World Bank report said that $9.7 billion (£6 billion) worth of damage was caused as 20 million people lost their homes and their livelihood.

Aid agencies said there was a danger that a stand-off over reforms would harm the victims of the floods. "It is very important we don't play politics with people's lives," said Shaheen Chughtai, an Oxfam adviser. "Overall the majority of aid in Pakistan goes to the people who need it. We can be ambitious by making an investment in rebuilding now that ensures Pakistan is better able to withstand the next disaster."

The United Nations however only received $800 million of the $2 billion, the biggest appeal in its history, it called for to provide immediate relief.

It is expected to encounter even less enthusiasm as it appeals for billions today and tomorrow at the Pakistan Development forum.