WASHINGTON, Oct 1: The US Export-Import Bank agreed on Tuesday to provide $125 million to Pakistan to help it buy passenger aircraft from the Boeing Co.

This is the first time that the bank is underwriting a deal between Pakistan and a private US firm.

Last month, the Pakistan government had agreed to contribute $150 million over three years to help the PIA finance the purchase of 10 new planes.

Finance Minister Shaukat Aziz said the money would help the airlines embark on an ambitious $2 billion fleet-overhaul programme that includes the scheduled purchase of 10 planes by 2011.

In August, PIA Managing Director Hamid Nawaz Khan had announced plans to improve the airline’s aging fleet with new aircraft.

PIA has agreed to take delivery of three Boeing 777s and seven turboprop aircraft by 2003.

Mr Aziz said the government’s decision to contribute 15 per cent of the total money needed to complete the purchase was largely due to the airline’s improved financial performance.

The average age of PIA planes is 23 years. It has 40 planes and 22,000 employees.

Pakistan and the Ex-Im Bank on Monday signed a letter of awareness, facilitating the bank’s opening of its Letter of Credit Programme in Pakistan. Ex-Im Bank’s letter of credit insurance policies are available to cover letters of credit issued by National Bank of Pakistan, United Bank, and Muslim Commercial Bank.

“We are delighted to strengthen our relationship with Pakistan,” Ex-Im Bank Vice-Chairman Eduardo Aguirre said. “This signing marks the culmination of a long process of cooperation. We’re hopeful this will help facilitate US exports to Pakistan and illustrate our confidence in the strength of Pakistan’s major banks to the international financial community.”