ISLAMABAD, April 3: The United States has, at long last, decided to write off $1 billion debt owed to it by Pakistan. A signing ceremony to formalize this write-off will be held here on Saturday.

“We have been informed that the US Congress has approved the Bush Administration’s decision to cancel our $1 billion loan,” said Secretary Economic Affairs Division, Dr Waqar Masood Khan.

He told Dawn on Thursday that he and US Ambassador to Pakistan Ms Nancy Powel will be signing an agreement on April 5 to write off $1 billion debt out of the total $3.1 billion owed by Pakistan.

In Net Present Value (NVP), he said, it was $200 million US debt owed by Pakistan which had increased to $1 billion over the years due to Islamabad’s inability to repay it.

The remaining $2.1 billion, still to be repaid by Pakistan, had been rescheduled by the United States, he said.

Earlier, Japan rescheduled last week its consolidated $4.5 billion debt owed by Pakistan for 38 years on a lower interest rate. It was the 16th bilateral agreement which was signed in pursuance of the Agreed Minutes of the Paris Club signed on Dec 13, 2001, covering a total debt relief of $12.5 billion.

Now less than $1 billion debt of South Korea and Russia is to be rescheduled shortly, which will complete the re-profiling of the entire $12.5 billion bilateral debt, Dr Khan said.

Among the Paris Club creditors, Denmark and the Commonwealth Development Corporation (CDC) of the UK have waived off their entire outstanding debt of $18.4 million and $29.5 million, respectively, while the Netherlands has also given remission in debt service payments, falling due between Oct 2001 and Dec 2002, equivalent to $14.3 million. The total cancellation of debt thus comes to $62.2 million.

From the non-Paris Club creditors, Saudi Arabia has provided grant assistance of $50 million in cash as a re-financing arrangement instead of rescheduling its outstanding debt under Paris Club-III.

An estimated relief of $1.2 billion to $1.5 billion will accrue to the country annually in debt repayment during the years 2001-2002 to 2004-2005. This decision, officials believed, will have a salutary effect on the balance of payments position.

Coupled with the fresh disbursements from the multilateral (IMF, World Bank and ADB) and bilateral (USA, UK, Japan and Saudi Arabia, etc) creditors, not only the balance of payments but also the reserves position and credit rating of the country have improved.

Now more funds can be spared for carrying out development activities, poverty alleviation, health and education.