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U.S. Is Planning an Aid Package for Pakistan Worth Billions
Published on Saturday, October 27, 2001 in the New York Times
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U.S. Is Planning an Aid Package for Pakistan Worth Billions
by Joseph Kahn
 
WASHINGTON -- 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 1990's, American aid to many developing nations fell, and the World Bank and the 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.


I absolutely support debt relief for Pakistan. But it's hypocritical to just dole out the money to Pakistan while denying help to others that are really even more in need.

Ann Pettifor, who heads Jubilee Plus
While Pakistan is unlikely to receive all the concessions it now seeks, the administration's package amounts to the largest mobilization of low-interest loans and debt relief since allies showered benefits on Egypt during the Persian Gulf War.

The aid envisaged by Washington would make Pakistan the largest recipient of American aid after Israel and Egypt.

Pockets of opposition are already becoming visible in Washington, among nongovernmental organizations and, more quietly, in Japan.

Japan recently rejected Pakistan's request to forgive the entire $5 billion owed Tokyo and is moving more slowly than the Bush administration to ease sanctions on that country imposed after Pakistan tested a nuclear weapon in response to India's similar test in 1998. Tokyo 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 American lawmakers say the Bush administration may have too readily agreed to give Pakistan about $600 million in cash this year and next without a reliable way of ensuring that the money would be used to improve health and education rather than to underwrite the military or the Islamic militants that Pakistan backs in the disputed territory of Kashmir.

"If you just write a blank check it will end up in the pockets of the wrong people," said Representative Jim McDermott, a Washington Democrat on the House Ways and Means Committee.

While Mr. McDermott supports helping Pakistan with its floundering economy, he said the Bush administration had "been a little cavalier" about wiping away sanctions on Pakistan imposed after General Musharraf took power in a military coup in 1999.

Representative Jim Kolbe, an Arizona Republican who chairs the foreign operations subcommittee of the House Committee on Appropriations, criticized the administration for granting valuable but vaguely defined "budgetary support," rather than financing well-supervised individual projects.

"I have not gotten sufficient reassurances at this point," Mr. Kolbe said.

The aid the United States provided to Pakistan and Afghan rebels during the Soviet occupation of Afghanistan in the 1980's 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 Shaukat Aziz, Pakistan's finance minister, have resulted in an agreement that the administration will work to secure four types of aid for Pakistan, administration officials said.

These include grants from the United States and other allies. In addition, the Bush administration is using its influence to support new loan programs by the I.M.F. and the World Bank, including an anti-poverty loan worth about $500 million from the I.M.F. and possibly a line of credit, at higher rates, of some $1 billion.

The United States 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 United States.

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 United States will monitor closely how the money is used. The official said Mr. Aziz had improved financial management enough to warrant more aid even if the Sept. 11 terrorist attacks had not happened.

But the official also acknowledged that Washington 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 recognized," he said. "We are going to find a unique approach for Pakistan."

The World Bank and I.M.F. have denied any debt relief to almost half of the eligible poor countries because they are embroiled in wars, fearing that money would diverted to the military. Pakistan now has conflicts on two of its borders.

"I absolutely support debt relief for Pakistan," said Ann Pettifor, who heads Jubilee Plus, a British group that advocates canceling the debts of all poor countries. "But it's hypocritical to just dole out the money to Pakistan while denying help to others that are really even more in need."

Copyright 2001 The New York Times Company

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