NCPA - National Center for Policy Analysis

Corruption And Foreign Aid

October 2, 1996

Calls are increasingly being heard for the U.S. to tie its foreign aid to progress against corruption in recipient countries. Graft and theft on a massive scale in many Third World countries, critics say, not only wastes Americans' resources and perverts their purpose, but fosters violence and religious extremism as a reaction to corruption.

They point to the practices of Pakistan's Prime Minister Benazir Bhuto as an example.

  • Ms. Bhutto's brother was gunned down several weeks ago after accusing his sister of squirreling away vast amounts of the nation's wealth.
  • The Prime Minister recently quietly acquired a 355-acre, $4 million estate in England, described as a "Fort Knox."
  • Her husband -- known as "Mr. Thirty Percent" for the cut he allegedly demands of each investment project in Pakistan -- has reportedly become the country's symbol of corruption run amok.
  • He was associated with a deal to buy fighter planes for the country, which also involved an unexplained $600 million overcharge -- the same amount, coincidentally, granted to Ms. Bhutto's administration by the U.S. taxpayer-funded International Monetary Fund.

Critics say changes should be made to protect Americans against these sorts of shenanigans in the future:

  • American aid packages, if they cannot be stopped, should be tied to strict conditions tying further disbursements to progress against corruption.
  • The International Monetary Fund should implement its recently announced "good governance" proposals -- which address the causes of corruption -- and countries like Pakistan should stop fighting their adoption.
  • Teams should monitor the flow of funds and ensure they are not funneled to the elite.

Observers warn that if we are not more vigilant, one day we may discover that terrorism on American soil was born of Third World policies funded by our money.

Source: Mansoor Ijaz (Crescent Investment Management), "A Primer on the Perils of Foreign Aid," Wall Street Journal, October 2, 1996.


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