terrorism doesn't pay (3)

Mark Jones mark.jones at tiscali.co.uk
Thu Sep 20 03:01:39 MDT 2001

US to reward Pakistan with billions in aid

Government may receive package to clear £25bn debts

Special report: Pakistan
Special report: terrorism in the US

Rory McCarthy in Islamabad
Thursday September 20, 2001
The Guardian

American officials are drawing up plans for a major economic aid package to 
reward Pakistan for supporting a military operation against Osama bin Laden 
and Afghanistan's Taliban regime.
Wendy Chamberlin, the new US ambassador to Islamabad, is due to meet the 
biggest financial donors to Pakistan today to work out the details of an 
economic assistance plan.
Washington will ask donors including Britain's department for international 
development, the EU, the International Monetary Fund, the Asian Development 
Bank, the World Bank and the Japanese government to give Pakistan all the 
support they can for a significant new package.
"You will find that we will stand by our friends who stand by us," Ms 
Chamberlin said. "We are currently looking at any number of ways to be 
responsive to Pakistan as they have been responsive to us."
In particular the donors will be asked to help ease Pakistan's suffocating 
$37bn (£25bn) debt burden, aid sources said. Many of those debts are due 
for repayment in the coming weeks and Washington now wants all countries 
involved to quickly sign rescheduling agreements.
Ms Chamberlin will also ask donors to give a quick agreement for the 
release of the final tranche of a $596m IMF standby loan which runs until 
the end of this month. Washington now wants the IMF to sign a much larger, 
long-term loan which has been under discussion for several months.
The loan would be worth several billion dollars at a very low rate of 
General Pervez Musharraf, Pakistan's military leader, was handed a further 
incentive to continue his cooperation yesterday when the Japanese prime 
minister, Junichiro Koizumi, said that Tokyo will provide emergency 
financial aid to Pakistan and India as a reward for their cooperation with 
the US. Japan halted economic assistance to the two countries in 1998 in 
protest at their nuclear weapons tests.
"This is a new era and many new options are on the table," an American 
official said last night. In recent months, teams from the IMF have 
complained that the military regime has not done enough to improve revenue 
collection - only 2% of Pakistan's population pay any tax - or to reform 
corrupt institutions and loss-making nationalised industries.
Those complaints are now likely to be quietly forgotten.
The donors will also be told the list of demands Washington has sent to 
Islamabad's military regime for assistance in the hunt for Bin Laden.
General Musharraf is facing growing protests from Islamic clerics who 
believe that Bin Laden is being unfairly singled out and that Islamabad 
should support the Taliban regime against the Americans.
There is no doubt Pakistan wants a reward from the US in return for risking 
an Islamic backlash. Shaukat Aziz, Pakistan's finance minister and a former 
Citibank executive, said: "As the relationship grows, I am sure economic 
ties will grow, which could mean better market access, better treatment on 
debt rescheduling and more money."
Shortly after the Soviets invaded Afghanistan in 1979 the United States 
gave a $3.2bn package in return for Pakistan's support in fighting the war 
of resistance.
More followed but money dried up in the early 1990s as sanctions were 
imposed in an effort to curb Islamabad's developing nuclear programme. 
Action was taken again after the military coup two years ago.
In the weeks before the attacks, Washington was preparing to start lending 
again with a small aid package worth around $3m.
Islamabad is now hoping the sanctions can be lifted. For the past decade 
investment in development has been largely ignored, and one-third of the 
country's 140m people live in poverty.
"This new aid could be the opportunity to breathe life into Pakistan's 
ailing social sectors after a decade of neglect," one European donor said 
last night.

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