Trump Wants to Convert Military Grants to Loans, Pakistan on List

The Trump administration’s budget proposal will convert some of the US’s foreign military grants to loans.

The Trump administration has proposed US $344 million in financial assistance to Pakistan. (Photo: AP)

The Trump administration has proposed converting some of the United States' foreign military grants to loans in the upcoming budget.

This is a part of a larger effort to slash spending on diplomacy, aid, and programs abroad by more than 29 percent, the White House said on Monday.

The cuts to programs under the State Department are in part meant to fund an increase in military spending. The White House budget documents show total defence spending for the 2018 fiscal at $603 billion, about three percent higher than Barack Obama's proposed defence budget for the year.

The $603 billion includes funding for nuclear weapons programs at the Department of Energy and other programs with the Department of Defense. The Pentagon's specific defence request is for $574.5 billion, an increase of 4.6 percent compared to fiscal year 2017.

Under Trump's proposal, the United States would spend 29.1 percent less on the State Department and ‘other international programs’, a decrease of $11.5 billion from the last fiscal.

That decrease includes a re-shaping of the way some countries receive military aid from the United States. Foreign military financing gives countries loans or grants to buy US military equipment. The State Department decides which countries are given the financing while the Pentagon executes the decisions. Under the Trump proposal, many current grants would instead be converted to loans.

The Trump administration has proposed $344 million in financial assistance to Pakistan including $100 million in foreign military funding, a massive $190 million reduction in grant as compared to the 2016 fiscal.

Pakistan plays a key role in US counter-terrorism strategy, the peace process in Afghanistan, nuclear non- proliferation efforts, and stability and economic integration in South and Central Asia. It is also a large and growing economy offering profitability for US businesses.

US State Department to PTI

We do change a couple of the foreign military programs from direct grants to loans. Our argument was instead of ... giving somebody $100 million, we could give them a smaller number worth of loan guarantees and they could actually buy more stuff.

Mick Mulvaney, Director, White House Office of Management and Budget to Reuters

Military aid to Israel and Egypt, two close US allies in the Middle East and the biggest recipients of US military assistance, will remain unchanged, Mulvaney said. The Wall Street Journal, which first reported the proposal, said the foreign military grants could affect Pakistan, Tunisia, Lebanon, Ukraine, Colombia, the Philippines and Vietnam.

US military assistance to partners and allies reached $13.5 billion in 2015, or 28 percent of all US foreign aid spending that year, according to the Congressional Research Service. Most grants through the Foreign Military Financing (FMF) program go to Israel, Egypt, Jordan, Pakistan and Iraq.

Congress ultimately controls the government purse strings and may reject some or many of the Trump administration’s proposals. Republicans and Democrats in Congress have criticized the size of the cuts to the State Department and U.S. Agency for International Development.

Mulvaney said that aid to Pakistan would be reduced, though he did not give concrete details. He told Reuters:

(The) State (Department) still has some flexibility to come up with a final plan on that, but I do know that writ large we have proposed to move several countries from a direct grant program to a loan guarantee program.

Potential Strain for Smaller Countries

Todd Harrison, a defense budget analyst with the Center for Strategic and Budgetary Assessments, said the switch from grants to loans for military aid may mean that countries will not be able to afford US military equipment, forcing them to go elsewhere for supplies.

Countries can buy from China or Russia. They have other places to shop, and one of the ways that we build capacity with our partners is through these grants. It’s in our interest to have interoperability with our allies, and these military grants are a part of that.

Todd Harrison, defense budget analyst, Center for Strategic and Budgetary Assessments to Reuters

Thomas Spoehr, who directs the Center for National Defense at the conservative Heritage Foundation, said the conversion from grants to loans will be a challenge especially for smaller military aid recipient countries like Macedonia and Tunisia. But “it’s a proposal whose time has come,” Spoehr said, given US budget deficits and high military spending overall.

This is probably a prudent place to make some cuts given all the other investments we make in national defense.

Thomas Spoehr, director, the Center for National Defense at the conservative Heritage Foundation to Reuters

Also Read: First Trump Budget Makes Military Great Again, Other Depts Gutted

(With inputs from PTI and Reuters.)