April 23, 2002	Tuesday	Safar 9, 1423

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WASHINGTON, April 22: Pakistan and United States officials are looking at areas for future economic cooperation, and the Bush administration has sent a supplemental request to Congress for an additional $145 million in aid to Pakistan for the current financial year.

This will bring the total US aid to Pakistan for the current year to $746 million. Figures for the next financial year are being firmed up, Finance Minister Shaukat Aziz told reporters on Sunday evening after a series of meetings with administration officials.

Aziz, who was in Washington for the annual spring meeting of the World Bank and the International Monetary Fund, also said World Bank President James Wolfensohn was expected to visit Islamabad next month. Pakistan has been negotiating a structural adjustment credit of $500 million with the bank for balance of payments support. WB loans, like those given by the IMF, also carry conditionalities.

The Bush administration’s supplemental request for $145 million appears meant largely to bolster Pakistan’s capability to support the US-led campaign against terrorism. The bulk of the money, $75 million, is meant for border security (communication equipment, night-vision aids, etc.), $40 million for infrastructure, and smaller sums for counter-narcotics and counter-terrorism. Aid pledges to Pakistan from the US and other developed countries since Sept 11 now total $1 billion to $1.2 billion.

Aziz referred to the setting up of the Pakistan-US Joint Economic Forum, whose first meeting was held on Friday, and hoped that similar institutional arrangements could be worked out in the trade and investment fields to cover subjects of great Pakistani interest like market access.

The minister met Treasury Secretary Paul O’Neill, Undersecretary of State for Economic Affairs Alan Larson and Gary Edson, special aide to President Bush on economic affairs. He was due to meet IMF Managing Director Horst Kohler before leaving for New York late Monday on his way home.

He claimed that Pakistan had repaid $4.6 billion in debt between the time the military regime took over and March this year, including $1.4 billion in expensive debt, and had taken new loans worth $3.1 billion. He said this indicated that there had been no net increase in the country’s debt burden.

Aziz said Pakistan’s economy had also been helped by an increase in foreign remittances to $1.4 billion from July to the end of March this year. This is attributed to the US drive to crack down on havala channels and illicit money as well as to efforts by the Pakistan government to persuade people abroad to use normal banking channels for their remittances.

SPECIAL SESSION: Illicit money and havala transactions also figured during a special session of the G-7 countries during the IMF-WB meeting. For the first time, 13 non-G-7 countries were invited to the session, including Pakistan and India. A presentation on Islamic banking was made by Malaysia during the session and it was believed to have clarified some of the confusion in Western minds about what the system actually implied.

However, one of the important issues raised at the G-7 and non-G-7 session was the issue of capital outflows, with the developing countries pointing out that the developed countries of the OECD, as major recipients of flight capital and bad money, had a responsibility to institute greater checks on large transfers of money. Not only banks in western countries, but also security houses, money changers and commodity houses should be obliged to evaluate the kind of money they were handling.

“Bad money doesn’t deserve a home,” someone familiar with the proceedings of the session quoted one of the participants as saying. Financial sectors and law enforcement agencies had to cooperate regionally and globally to work out a mechanism to keep tabs on such money.

A World Bank overview of international finance also has pointed out that capital flow reversals have severely damaged living standards in several countries. The study says weak controls by developing countries on preventing capital outflows have had only limited success because of weak domestic investment opportunities and fears of confiscation or reduction in the value of assets.