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1- UBL: STRONG FINANCIAL RESULTS
2- REVENUE COLLECTION FOR THE THIRD QUARTER
3-
PARIS CLUB LOANS
4- $ ONE BILLION LOAN WRITE OFF BY US
5- USING FOREX RESERVES FOR PROJECT FINANCING

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$ ONE BILLION LOAN WRITE OFF BY US

 

The ultimate objective to cleanse the tax departments of corruption in collusion with tax evaders

 

From SHAMIM AHMED RIZVI, Islamabad
Apr 14 - 20, 2003

 

 

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 dollar.

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".