ISLAMABAD, July 16: Pakistan and the US signed on Friday an agreement that formally waived a $495.3 million debt owed by Islamabad to Washington.

Economic Affairs Division (EAD) Secretary Dr Waqar Masood Khan and US Ambassador Nancy Powell signed the agreement.

The agreement marks a continuation in the US partnership with the government and people of Pakistan, Ms Powell said on the occasion. She said the United States' continued commitment to Pakistan was a vote of confidence in the economic stewardship of the Pakistan government and the intelligence, energy and resourcefulness of the Pakistani people.

The ambassador said the agreement culminated an extraordinary period of debt relief and emergency financial assistance that included a $600 million cash transfer in November 2001 for balance of payments and budget support, the August 2002 rescheduling of the entire stock of $3 billion of bilateral official debt over 38 years, and the write-off in April 2003 of $1 billion bilateral debt.

"This final instalment of debt cancellation marks an evolutionary transition from stabilization assistance to participation in Pakistan's economic take-off and sustained development," she said.

With this debt cancellation agreement amounting to $495.3 million, the total outstanding US debt (including non-ODA) debt would amount to $1.6 billion, Dr Masood said.

Ms Powell said the US security assistance programme included assistance to Pakistan to secure its border with Afghanistan, support common narcotics control and law-enforcement programmes, counter-terrorism and international military education and training.

She said the US government and Pakistan were closely working with the multilateral financial intuitions to leverage significant resources needed to reform Pakistan's economy.