Fighting terror has handsome rewards.
ISLAMABAD, Jan 27 (Reuters) - The United States has approved $395 million in aid to Pakistan, almost half of which will be used to write off debt to Washington, a government minister said on Tuesday.
Finance Minister Shaukat Aziz said under the agreement, Pakistan would repay $200 million to the United States, which would save it about $400 million-$500 million in interest payments over the period of the loan.
The rest of the money would mainly be used to improve health and education in Pakistan, he told a news conference.
Pakistan has total foreign debt and liabilities $35 billion of which $33 billion is debt.
Aziz said Pakistan and the United States had also agreed on a framework of how to utilise another $3 billion promised by the United States over the next five years.
“The theme of this programme will be investment, growth and human development. These, we have agreed, will be the focus of five-year engagement with the United States,” Aziz said.
Pakistan won financial incentives from the United States and its allies for its support in the U.S.-led war on terror, especially against the Taliban and al Qaeda network, following the September 11, 2001, attacks on the United States.
The $3 billion package was announced by President George W. Bush at Camp David in a meeting with Pakistan’s President Pervez Musharraf in June last year.
According to the agreement, $600 million will be disbursed each year. Half of the amount will be for defence equipment purchases by Pakistan and the other half for economic development.
Earlier on Tuesday, Pakistan signed an agreement with four United Nations agencies for development work worth $411 million between 2004-2008, the government said in a statement.
It said the United Nations Development Programme would make poverty reduction the “core objective” of their activities, while the U.N. Population Fund would focus on reducing maternal mortality and fertility rates.