WASHINGTON, Feb 22: Administration officials are “under instruction” from President George Bush to give “top priority” to working with Congress on the debt relief package for Pakistan announced by the US last week, according to the seniormost State Department official in charge of economic affairs.

Pakistan was promised a $1 billion write-off from its bilateral debt to the US of $2.8 billion during Gen Pervez Musharraf’s visit to Washington last week and his meeting with President Bush at the White House. The write-off will be made possible by a small upfront enabling credit of $200 million, but the proposal will have to be approved by Congress before it can get through.

Undersecretary of State for Economic, Business and Agricultural Affairs Alan Larson said on Thursday afternoon a lot of credit went to Pakistan’s economic team, with which he had been working for two years now, for putting in place a reform programme that had won support for rescheduling of the country’s debt. Pakistan’s debt went back a long, long time, and its officials felt that rather than have it rescheduled, it would be better if a portion of it was extinguished, and this was being done.

Briefing a group of journalists on next month’s Financing for Development Conference in Monterrey, Mexico, Mr Larson laid stress on an approach to developing countries that put more emphasis on aid in the form of grants rather than loans so that any additional assistance did not increase the debt burden of countries.

He said the consensus document prepared for Monterrey took a comprehensive look at domestic financial resources of poorer countries, including internal savings (estimated by the World Bank at $1.7 trillion), as sources of financing. “Dead capital” in such countries should be unlocked through the establishment of basic financial institutions.

The US approach to Monterrey is in part shaped by criticism that it has not met targets of aid to developing countries set out by international organizations and conferences. The US has also been accused of following a unilateralist approach in economic as well as political affairs.

In a previous interview, Mr Larson had held that the US viewed aid more as an enabling tool than a substitute for other forms of investment and stressed that aid should be used to help countries improve their capacity to participate effectively in the global economy.

Answering a question at his briefing, Mr Larson said in its economic aid programmes, the United States did look at the issue of defence spending, with transparency in defence budgets as the base line.

“We are concerned with excessive defence expenditure which is not transparent,” Mr Larson added, but pointed out that the needs of a developing country to ensure its security were also recognized. Security, after all, was a starting point for development.

Mr Larson said the US emphasis was on capacity building and it was prepared to increase its contribution to international financing institutions if effective benchmarks were established. He said sustainable development was linked to social advancement through education, gender equality, and raising health standards.

The Monterrey conference, which President George Bush is expected to attend, is one of four major meetings this year devoted to development as a key theme.