ISLAMABAD, May 18: The US administration is likely to finalize a $1.2 billion economic package for Pakistan during President Pervez Musharraf’s visit next month, Dawn has learnt.

Pakistan has been asking the US administration in recent weeks to write off its remaining $1.8 billion bilateral debt. The issue was raised with US deputy secretary of state Richard Armitage during his visit to Islamabad early this month, sources said.

The issue has also been discussed by the ministry of finance at the official level, and the US authorities have indicated their readiness to waive around $1 billion from Pakistan’s bilateral debt.

Under budgetary proposal for the year 2004, the US authorities have included around $395 million in their economic support fund through which they had written off $1 billion last year, sources in the finance ministry said.

These sources said this amount included around $200 million for debt waiver, $50 million for border security equipment, $100 million through USAID and $50 million for military hardware.

The sources said that $200 million debt write-off by the US would have an impact of $1 billion in Pakistan’s bilateral debt when taken at net present value and would be adjusted in Pakistan’s debt repayment schedule.

This would leave only $800 million debt to be payable by Pakistan to the US.

The amount Islamabad receives on account of its actual billing for the logistic support to the US forces does not form part of this package.

The process of $200 million debt write-off by the US authorities would take around a year to materialize because of their lengthy approval process.

According to the data provided to Pakistan Development Forum (PDF) last week, Pakistan’s total external debt and liabilities have dropped from $37.9 billion in June 2000 to $35.58 billion by end-March 2003. The $1 billion debt written off by the US last year has now been excluded from the debt portfolio.

The public debt and publicly guaranteed debt, including the Paris Club, multilateral and bilateral debt and liabilities, have however increased from $27.86 billion in June 2000 to $29.381 billion by end-March 2003.

The IMF debt has also increased from $1.55 billion in June 2000 to $2.07 billion in end-March 2003.