While Pakistan continues to receive support from international partners, the absence of adequate oversight in managing foreign finance poses growing challenges for the country’s economic stability.
Foreign INGO’s entrust wrong partners locally with no due diligence or enter in Pakistan with an agenda to influence policy. Same is the case with countries like India, Philippines and Thailand. Without stronger controls, this trend risks undermining national interests, missing out on valuable revenue, and straining the trust of global stakeholders, at a time when the nation is already grappling with rising debt and inflation.
Misappropriated or untraceable foreign aid has evolved to represent more serious institutional shortcomings. USAID invested a whopping $840 million in Pakistan’s education system to improve underprivileged areas. Reports, however, revealed that $136 million was set aside for 120 fictitious schools. Given that many intended beneficiaries lacked access, an additional $20 million was invested on educational television programs that were never successfully broadcast.
These disclosures have caused a decline in trust and may have played their part in freezing of US$845 million aid to Pakistan. The harm to Pakistan is not just monetary but also reputational, raising questions about future assistance from both bilateral and multilateral donors.
The existence of unregistered international NGOs (INGO’s) further exacerbates the situation. Bloomberg Philanthropies-funded organizations, including Vital Strategies and the Campaign for Tobacco-Free Kids (CTFK) have operated in Pakistan without adhering to local reporting and registration regulations. Authorities discovered irregularities in the way funds were used, even though their objective is supposed to assist public health. As a result, the Interior Ministry ordered the State Bank to freeze their accounts. Despite their claims to reduce tobacco consumption, critics contend that these INGO’s have not done much to combat the illegal cigarette trade, thus fostering the growth of black markets.
Furthermore, the International Monetary Fund (IMF) has raised concerns about Pakistan’s illicit commerce, as the Federal Board of Revenue’s (FBR) Track and Trace system is still not well enforced, despite some progress in reducing evasion in sectors like sugar and cement.
Specifically, in the cigarette industry, illicit goods now account for up to 54% of the market. IMF officials expressly mentioned this as a significant source of revenue leakage during discussions for a crucial $1 billion tranche under a bailout package.
In addition to undermining national sovereignty, this regulatory gap encourages illicit economic activity that has a significant financial cost to Pakistan. For instance, the FBR estimates that the illegal cigarette trade alone causes tax losses of around PKR 300 billion annually. Such losses deny the government vital resources for infrastructure, education, and health.
Mismanagement of finances has repercussions. The rationale for future help is weakened when aid does not reach its intended audience because of inadequate monitoring. Donors start to wonder if their money is fostering inefficiency or facilitating development.
Pakistan runs the risk of becoming marginalized by the very organizations designed to aid in its development if immediate reforms are not made. One economist said, “We are in an economic crunch, and we are on our own if donors do not trust us.” Pakistan has to enhance institutional checks and balances, ensure transparent tracking of foreign funding, and impose strict registration procedures for all INGOs to rebuild trust. The country can only guarantee that every dollar of aid helps with its economic recovery—rather than being another missed chance—by enforcing responsibility.
INGOs in Pakistan Face Shutdown Over Financial Irregularities
