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East-West Debt october 2003 news, update : PAKISTAN

Pakistan gets US aid, expects more

In addition to the cancelling of $1bn of debt owed to the United States on April 5, 2003, Pakistan asked Washington to forgive another $1.8bn it owes the United States, in return for its support for the US-led war on terror. Pakistani authorities insist that more debt relief is necessary to make investments in infra-structure and upgrade the country's public services.

Washington agreed to draft a better repayment schedule for the $1.8bn. On June 24, however, Pakistani President Gen. Pervez Musharraf said he would also be urging the US government for a better access to the US market for Pakistani goods, further debt relief and an end to military sanctions.

Of Pakistan's $36bn foreign debt, a third was rescheduled by the Paris Club. So far, Pakistan has avoided defaulting on its debt repayments, even though this was expected earlier this year. The government claims, however, that its budget has been strained by the cost relating to the war on terror, in particular operations resulting from the conflict in neighbouring Afghanistan.

Pakistan plans to seek $8 to 10 billion from the United States as further compensation for the losses suffered during the military intervention in Afghanistan. A government official said that the ministry of finance was estimating the losses, including lost exports and deteriorated investment climate.

On August 1 the United States paid Pakistan $256m for the country's support in military operations in Afghanistan. In July US President George W. Bush promised to give Pakistan $3bn in economic and military aid over the next five years, although the proposal still needs the approval of the US Congress.

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