TOKYO, Feb 10: Japan said on Monday it had agreed to provide a 26-million-dollar loan to Pakistan, the first fresh lending since Tokyo lifted its sanctions in 2001.

The Japan Bank for International Cooperation signed a loan agreement totalling 26 million dollars with Pakistan in Islamabad last week, a bank official said.

The loan is part of Japan’s support for construction of a 1,885-metre tunnel and its approach road in the North West Frontier Province, the government-run bank said.

Under a commitment made before the introduction of sanctions, Japan has already provided nearly 100 million dollars for the project, named the Kohat Tunnel Construction Project, to be carried out by the National Highway Authority.

The new untied loan, with an interest rate of 1.8 per cent, is scheduled to be repaid in 30 years with a 10-year grace period.

The project will “stimulate social and economic development in the North West Frontier Province, where the poverty rate is high and ultimately contribute to balanced economic development in Pakistan”, the bank said in a statement.

Since the sanctions ended, Tokyo has already rescheduled 550 million dollars of Pakistan’s debt in recognition of its support for the “war on terrorism” and extended 40 million dollars in emergency aid.

Japan was Pakistan’s biggest foreign aid donor until it suspended aid in 1998. Up until 1996, Tokyo was also Islamabad’s second-biggest trading partner, after Washington. —AFP