ISLAMABAD, April 3: Italy has converted its $100 million debt into funding for development of social sector in the country.

Minister for Finance Ishaq Dar inaugurated on Thursday a meeting of the Joint Management Committee for the conversion of Italian debt into development project funding at the Economic Affairs Division (EAD).

The committee considered projects to be funded under the Italian Debt for Development swap of $100 million. The loan under the swap is proposed to be offset in five equal annual tranches and the government of Pakistan has set aside $20 million (Rs1.2 billion) this year for the purpose.

Secretary EAD led the Pakistan delegation and the Italian side was led by Italian ambassador.

Mr Dar thanked the Italian government for debt conversion and emphasized that the selection of projects should be linked with the policy framework of the newly-elected government and contribute to the development of social sector, in particular the poor segments of society.

Italy, on the request of Pakistan, had initially agreed to waive off half of its loan of euro 85 million approximately on the presentation of a record of expenditure incurred on upkeep of the Afghan refugees since 2001. The debt cancellation occurred in 2006.

For the remaining loan, both sides agreed for a debt-for-development swap and an agreement was signed in 2007. The payments eligible for swap operations are to be made from budgetary resources of Pakistan and shall be spent on jointly-agreed social and development projects by a Joint Management Committee.

Priority will be given to projects aimed at rural development, poverty alleviation and education and may include the projects of federal government, provincial governments or local governments, non-governmental organisations or channelled by relevant UN organisations such as FAO, IFAD and WFP projects.