The abrupt suspension of US assistance to Pakistan under USAID has exposed the fragile foundation upon which the country’s development programs rest. Pakistan has cascaded into a humanitarian crisis affecting 1.7 million people, revealing not just Pakistan’s dangerous dependency on foreign aid, but also its fundamental inability to prioritize its own citizens’ welfare over military spending and institutional inertia.
The Economic Affairs Division’s recent brief to the Prime Minister’s Office underscores the gravity of the situation, highlighting “significant funding and institutional capacity gaps” created by the USAID suspension. This acknowledgment, while necessary, represents face of Pakistan’s development strategy, one that has consistently outsourced essential services to foreign donors while maintaining bloated defense budgets and failing to address systemic governance issues.
The immediate impact of the USAID suspension reads like a catalog of preventable disasters. In Sindh’s Shikarpur district alone, over 100 workers lost their jobs when the US-funded tuberculosis control program halted operations. This program, launched in November 2023 to combat tuberculosis in 15 underdeveloped districts by 2029, was addressing a critical health challenge in a country that ranks sixth globally for tuberculosis burden with over 600,000 new cases annually.
The suspension has also devastated HIV/AIDS programs, cutting off life-saving medications for thousands of patients in a country where over 210,000 individuals live with HIV. The closure of more than 60 US-funded health facilities has left healthcare authorities scrambling for alternatives, with provincial governments openly acknowledging their inability to fill the gap.
These statistics represent more than bureaucratic failures but they reflect a systemic abdication of responsibility by a state that has grown comfortable allowing foreign entities to manage its most basic obligations to its citizens.
Even as Pakistan grapples with the USAID suspension, it continues its familiar dance with the International Monetary Fund, recently securing another billion-dollar bailout that brings total disbursements to $2.1 billion. However, this financial lifeline comes with 11 stringent conditions that reveal the IMF’s growing skepticism about Pakistan’s commitment to meaningful reform.
The conditions range from approving a ₹17.6 trillion budget aligned with IMF targets to implementing agricultural income tax reforms across all provinces. The IMF has also demanded governance action plans, electricity tariff adjustments, and the removal of caps on debt service surcharges. These requirements represent not just economic prescriptions but admissions of Pakistan’s chronic governance failures.
Particularly telling is the IMF’s insistence on transparency in defense spending and concerns about “rising tensions between India and Pakistan” that could “heighten risks to fiscal, external and reform goals.” This diplomatic language masks a harsh reality, international lenders are increasingly unwilling to subsidize Pakistan’s military priorities at the expense of economic development.
Pakistan’s engagement with the European Union’s GSP+ program further illustrates its approach to international commitments. The recent Implementation Committee discussions on human rights concerns led to cosmetic decisions, removing death penalty provisions from certain sections of the Pakistan Penal Code, formalizing procedures for mercy petitions, and hastening appointments to the Commission of Inquiry on Enforced Disappearances.
These measures, while ostensibly progressive, represent the minimum viable compliance necessary to maintain trade preferences rather than genuine commitment to human rights reform. The fact that such basic measures require international pressure to implement speaks volumes about Pakistan’s domestic priorities and the superficial nature of its reform efforts.
Perhaps the contradiction in Pakistan’s economic narrative is its continued prioritization of defense spending despite chronic fiscal constraints. Reports indicate Pakistan plans to increase defense spending by 18% in the next fiscal year, even as it slashes development expenditure by 20% and reduces social sector spending by 25%.
This represents a fundamental misallocation of resources that no amount of foreign aid can remedy. While Pakistan allocates 2.3% of GDP to defence, higher than India’s 2%, it continues to rely on international donors for basic healthcare, education, and humanitarian services. The IMF’s reported disagreement with Pakistan over this defense spending increase reflects growing international frustration with such priorities.
Pakistan’s challenges extend beyond economic mismanagement to deeper societal issues. The country’s education system, dominated by orthodox madrassas that often promote rigid interpretations of religious doctrine, has failed to produce the critical thinking and innovation necessary for modern economic development. This educational approach perpetuates cycles of dependency and limits the country’s ability to develop indigenous solutions to its challenges.
The suspension of USAID programs has revealed how extensively Pakistan has outsourced not just funding but also expertise and institutional capacity to foreign entities. When these programs disappear, the country lacks the human capital and institutional framework to maintain essential services, a direct consequence of decades of underinvestment in education and capacity building.
International donors face an increasingly difficult calculus when engaging with Pakistan. The repeated cycles of aid dependency, minimal reform compliance, and continued military prioritization raise fundamental questions about the effectiveness of development assistance. The donor community’s growing skepticism is evident in the IMF’s increasingly stringent conditions and the USAID suspension itself.
These actions reflect a recognition that traditional aid approaches have failed to incentivize meaningful reform or reduce Pakistan’s dependency on external assistance.The current crisis may indeed serve as the wake-up call that some analysts suggest. Pakistan’s Economic Affairs Division’s recommendation to apprise the US of the “impact of suspension” and “need for continued support” represents precisely the wrong response, more begging rather than introspection and reform.