United States waives off $ 495 Mln debt to Pakistan
By Shiraz Aslam - Pakistan Times Staff Reporter

ISLAMABAD: The US has signed an agreement to waive off 495 million-dollar debt Friday in Islamabad.

This would reduce Pakistan’s external debt by $496 million that Islamabad owes to Washington. The US budget for 2004 had provided $200 million for this facility, as part of an overall $395 million aid bill.

Dr Waqar, Nancy Sign

Dr Waqar Masood Khan, Secretary Economic Affairs Division [EAD] signed the agreement here Friday with Nancy Powell, US Ambassador to Islamabad. The bilateral debt totalled $2.07 billion at the end of 2003.

The US Ambassador Nancy Powell said it was an act of participation with the people and government of Pakistan by the United States. She appreciated the economic reforms introduced by Pakistan adding that the economy of Pakistan will be further improved.

In-depth

The accord, signed Friday bears an important significance as this would help a debt cancellation amounting to US $ 495.3 million in official government to government debt owned by Islamabad to Washington.

This step is in pursuance of the agreed minutes of the Paris Club of December 13,2001 under which the two governments agreed to the consolidation and rescheduling of debt owed by Pakistan to the United States of America.

Proviso

Under the bilateral agreement signed between the two countries, US $ 3 billion debt was consolidated. Out of the ODA debt of US $ 2.3 billion, US $ 1 billion debt has already been cancelled in April 2003.

With the present cancellation agreement the outstanding US debt (including non-ODA debt) will amount to US $ 1.6 billion.

Nancy Powell Lauds Economic Policies

Speaking on the occasion Ambassador Nancy Powell appreciated Pakistan's economic policies initiated during the past five years which have improved macro-economic situation in the country.

This agreement, she said marks a continuation in the United States partnership with the government and people of Pakistan. "Our continued commitment to Pakistan is a vote of confidence in the economic stewardship of the Pakistani government and the intelligence, energy and resourcefulness of the Pakistani people", the Ambassador added.

'Pakistan Times' understands that Friday's half-billion dollar debt cancellation culminates an extraordinary period of debt relief and emergency financial assistance that includes a $ 600 million cash transfer in November 2001 for balance of payments and budget support, the August 2002 rescheduling of the entire $ 3 billion of bilateral official debt over 38 years, and the April 2003 elimination of $ 1 billion in bilateral debt.

Final Installment

"This final installment of debt cancellation marks an evolutionary transition from stabilization assistance to participation in Pakistan's economic take-off and sustained development", Ambassador Powell remarked.

Bush Moves to Congress

President Bush has requested $ 3 billion from Congress, over the next five years, of which al least $ 1 billion ($ 200 million/year for five years) will be earmarked to bolster macroeconomic stability and invest in human capital and private sector development.

Furthermore, $ 500 million ($ 100 million/year) will fund ongoing USAID programs to improve education, health programs and good governance in Pakistan.

Pakistan Reax

Dr. Waqar Masood Khan in his remarks said the government of Pakistan has pursued an aggressive debt management strategy as part of an overall medium term macroeconomic agenda focused on stabilizaiotn, growth and development.

He expressed the hope that the Debt Cancellation Agreement signed today between US and Pakistan will help create incremental fiscal space which will be directed towards social sectors and job creation programs.

He said Pakistan has reduced both the amount and the cost of foreign debt while the cost of domestic debt has come down significantly due to lower interest rates.

These developments, he said reflect the successful efforts aimed at controlling fiscal deficit, conducting a prudent monitoring policy, containment of inflation and overall structural reforms.

Pakistani-Americans Welcome Debt Write-off

And in Washington, the Association of Pakistani Professionals [AOPP] has welcomed the $495 million debt write-off by the United States.

AOPP is a US based think tank that strives for educated point of view about Pakistan and its people.

Syed Asif Alam, President AOPP in a statement Thursday said: "Pakistan is a frontline state in the war against terrorism and has provided the United States with its undaunted support."

At this juncture, he said "Pakistan needs United States' help to revamp and reform its basic infrastructure." He said, "debt-write off is a right start, which, we hope, will lead to open trade, assisting Pakistan in poverty alleviation and funds towards socio-economic development.●