Pakistan and United States of America, signed an
agreement for cancellation of $ one billion US loan in Islamabad. Nancy
Powell, US Ambassador to Pakistan and Dr. Waqar Masood Khan, Secretary,
Economic Affairs Division, signed the agreements on behalf of their
governments. Senator Shaukat Aziz, Prime Minister's Advisor on Finance
and Economic Affairs, witnessed the signing ceremony.
After signing the write off documents, Mr. Shaukat
Aziz told newsmen that the US financial assistance has reached $ 3
billion (around $ 2.846 billion) compensating Pakistan for having
associated with Coalition Forces in Afghanistan. It included nearly $ 1
billion cash grants (including assistance by US aid and grants for
security and equipment), $ 300 million OPIC and $ 600 million Exim trade
facilities and now $ 1 billion write off. This fulfills the promise
President Bush made to President Pervez Musharraf last year.
He said that during President Pervez Musharraf's
visit to the United States in February 2002, President George W. Bush
had committed that he would work with the US Congress for cancellation
of Pakistan's debt of $ one billion during the next US fiscal year
starting from October 1, 2002, besides debt rescheduling agreed under
the Paris Club agreement of December 2001.
Accordingly, he said, a bilateral agreement on
rescheduling of external debt was signed on August 23, 2002 between the
Government of Pakistan and the United States of America for an amount of
$ 3 billion. Under the said rescheduling agreement, ODA portion of
rescheduled debt ($2.3 billion) was repayable in 38 years, including 15
years of grace period, at concessional rates while the non-ODA portion
of rescheduling debt ($ 0.7 billion) was repayable over a period of 23
years, including 5 years of grace period at an appropriate market rate.
Out of the total rescheduled debt amounting to $ 3 billion, $ 1 billion
has been cancelled by the United States of America through the agreement
signed now, he said.
Mr. Shaukat Aziz also said that debt has reduced the
gross external liabilities from $ 36.3 billion to $ 35.3 billion. While
due to huge proliferation of forex reserves up to $ 10.4 billion, the
net external debt is $ 28.6 billion. The net (gross minus SBP forex
reserves) would be now $ 27.6 billion, a simple reduction of one billion
The interest rate saving from this signing is $ 335
million, which had to accumulate on one billion dollars and an
additional saving. He said that the agreement should help create
incremental fiscal space which would be directed towards social sectors
and job creation programmes.
Addressing the ceremony US Ambassador Nancy Powell
said that $ 1 billion worth of bilateral debt relief is representing
nearly one-third of what Pakistan owes to the US. She said "this
fulfills a promise President George W. Bush made to President Pervez
Musharraf last year to work with the US Congress to write off a
significant portion of Pakistan's sovereign debt." It was made
possible after Congress recently passed a budget for the US Federal
Government for the current fiscal year which included the necessary
funds to pay the debt".
This $ 1 billion in debt relief will add to the
momentum of Pakistan's economic recovery by allowing the Government of
Pakistan to use its energies and budget resources on critical social
development priorities identified in the government's Poverty Reduction
Strategic Plan," remarked the US Ambassador after signing the
agreement. "This means more room in the federal budget to pay for
schools in the rural areas, improve teacher training, expand
immunisation programmes for children and teach young people about
HIV/AIDS," she hoped that Government of Pakistan will use the money
it saves today to fund important programmes like these, and keep up the
war on poverty.
"I want to stress," the Ambassador added,
"that the writing off of $ 1 billion in bilateral debt is just one
piece of a multi-faceted, multi-billion dollar assistance package the US
is providing to Pakistan". Our strong bilateral economic assistance
programme includes significant outright grants and additional debt
relief, USAID initiatives in education, health, governance and micro
finance programmes to combat child labour, agricultural grants and
credits and trade and investment support.
Our security assistance programme includes assistance
to help Pakistan secure its border with Afghanistan, counter narcotics
and law enforcement programmes, counter-terrorism programmes,
international military education and training and foreign military
financing, she added.
She said, "we also work closely with
multilateral institutions, including the IMF, World Bank and Asian
Development Bank, to leverage the significant resources needed to reform
Pakistan's economy and alleviate poverty".
The United States is in Pakistan for the long-term,
Powell affirmed. "When you look at all the programmes and all the
initiatives, I think you will agree that the new relationship between
the United States and Pakistan is not just about September 11, she
remarked. It is about the rebirth of long-term partnership between the
two countries, she said adding, today's signing represents a promise
kept and another milestone in our expanding partnership".