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Punjab cancels six US aid agreements

May 20, 2011

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Former Prime Minister Nawaz Sharif addressing a press conference in Lahore along with Chief Minister Punjab Shahbaz Shariff. - Online (file) photo

LAHORE: Pakistan's most populous province has cancelled six aid agreements with the United States in protest over the US raid that killed Osama bin Laden, its law minister said on Friday.

Pakistan hailed bin Laden's death as a big step against militancy but was incensed by the raid in a garrison town not far from the capital, saying it was a violation of sovereignty.

The operation severely strained already uneasy ties between the United States and Pakistan, whose cooperation is needed to stabilise Afghanistan.

“We have cancelled six MOUs (memorandums of understanding) with the United States in the fields of health, education and solid waste management,” said Rana Sanaullah, Law Minister of Punjab, the country's political nerve centre.

“We have told their concerned departments about our decision. This is our protest against the Abbottabad incident.”

The Pakistan Muslim League (PML-N) opposition party, which rules Punjab, has called for a review of the country's ties with Washington, urging the central government to reduce reliance on foreign aid.

A PML-N spokesman said Punjab had been expected to get 20 billion rupees ($232.55 million) for welfare projects in the next three years from the United States.

“This will not have much effect as the amount is quite small and it (the decision) has not been taken by the federal government but instead the provincial government,” said Asif Qureshi, analyst at Invisor Securities, a brokerage firm based in Karachi.

Bin Laden's presence in Pakistan has led to calls by some US congressmen to cut aid to the country.

Pakistan is struggling to revive its economy, which depends heavily on an $11 billion International Monetary fund loan to stay afloat.

To get the remaining tranches of the loan, which was secured in 2008, Pakistan must implement politically unpopular reforms such as broadening its tax base and reforming the energy sector.

One of the lowest tax-to-GDP ratio in the world of around 10 per cent has increased Pakistan's reliance on foreign funds and loans, even for development projects.

Pakistan received $20 billion in US military and economic aid in the past 20 years.