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Pakistan set to become largest recipient of US aid after Israel, Egypt


 WASHINGTON, October 29 (Internews): The Bush administration has put
 together an aid package for Pakistan that is likely to total several
 billion dollars and includes sweeping debt rescheduling, grants
 stretching over many years and trade benefits as a reward for its
 support against terrorism.
 The package, which is encountering some resistance in Washington and
 abroad, would represent a departure from the often-glacial process of
 aiding poor countries in recent years.
 Through the 1990s, American aid to many developing nations fell and
 World Bank and International Monetary Fund set up elaborate mechanisms
 to determine which poor nations should receive debt relief.
 Pakistan, with an average per capita annual income of $500 but with
 access to world capital markets, was not among them.
 While Pakistan is unlikely to receive all the concessions it now seeks,
 the administration's package amounts to the largest mobilisation of
 low-interest loans and debt relief since allies showered benefits on
 Egypt during the Gulf War.
 The aid envisaged by US would make Pakistan the largest recipient of
 American aid after Israel and Egypt.
 Pockets of opposition are already becoming visible in Washington, among
 nongovernmental organisations and, more quietly, in Japan. Tokyo
 recently rejected Pakistan's request to forgive the entire $5 billion
 owed it. Japan has agreed, however, to delay payments on about $500
 million in Pakistani debt.
 While the support may reward President Pervez Musharraf for his backing
 of the American-led coalition, critics worry that politically inspired
 aid could be misdirected.
 Some US lawmakers say Bush may have too readily agreed to give Pakistan
 about $600 million in cash this year and next without a reliable way of
 ensuring the money would be used to improve health and education rather
 than to underwrite the military.
 The aid the US provided to Pakistan and Afghan rebels during the Soviet
 occupation of Afghanistan in the 1980s is widely seen as having helped
 finance the rise of the Taliban, which now controls most of Afghanistan.
 Talks between officials of the State and Treasury departments and
 Pakistan's Finance Minister Shaukat Aziz have resulted in an agreement
 that the administration will work to secure four types of aid for
 These include grants from the US and other allies. In addition, the Bush
 administration is using its influence to support new loan programmes by
 the IMF and the World Bank, including an anti-poverty loan worth about
 $500 million from the Fund and possibly a line of credit, at higher
 rates, of some $1 billion.
 The US has already begun calculating how to reschedule payments on the
 $3 billion Pakistan owes Washington. It has urged allies to do the same,
 and Britain has already followed suit. Bilateral loans total about $12
 billion out of the country's $38 billion foreign debt. Pakistan may also
 secure a higher quota or lower tariffs for its textile exports to the
 Pakistan estimates that the war in Afghanistan will cost it some $2.5
 billion this year alone, including lost trade and tourism and the
 expense of caring for Afghan refugees.
 One senior administration official said the US will monitor closely how
 the money is used. The official said Aziz had improved financial
 management enough to warrant more aid even if the Sept 11 terrorist
 attacks had not happened. But he also acknowledged that US would support
 Pakistan's bid to get some extraordinary benefits.
 "The reality is that this is a country that has behaved in a stalwart
 fashion during this crisis, and that is going to be recognised," he
 said. "We are going to find a unique approach for Pakistan."
 The World Bank and IMF have denied any debt relief to almost half of the
 eligible poor countries because they are embroiled in wars, fearing that
 money would be diverted to the military. Pakistan now has conflicts on
 two of its borders.
 "I absolutely support debt relief for Pakistan," says Ann Pettifor, who
 heads Jubilee Plus, a British group that advocates cancelling the debts
 of all poor countries. -Internews

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