TOKYO, (Reuters) – Pakistan secured more than $5 billion in fresh aid over two years at a donors conference yesterday after President Asif Ali Zardari vowed to step up the fight against militants.
The pledges, bigger than an expected $4 billion, reflect the international community’s worries an economic meltdown in Pakistan, propped up with a $7.6 billion loan from the International Monetary Fund over two years, could fan popular support for al Qaeda and other militant groups.
“The participants also noted concern about the security situation in Pakistan and the impact on development, the investment climate, and growth,” co-chairs Japan and the World Bank said in a statement.
The new aid is targetted for areas such as health, education, governance and building democracy. Commitments to existing aid programmes totalling $15 billion were also reaffirmed.
Foreign investors are eager to see Islamabad proceed with tough economic reforms considered vital to restore growth. Pakistan narrowly averted a balance of payments crisis in November when it secured the IMF loan package.
World Bank Vice President for South Asia Isabel Guerrero told a news conference the funds must be used effectively.
“It is very important that these development resources are used in a way that they do reach the poor, that they do increase the productivity of Pakistan’s economy, so that Pakistan can go back to a high growth path and to poverty reduction.”
“Pakistan has one of the lowest tax revenue-over-GDP in the world, and therefore the efforts that the economic team is doing right now to increase domestic taxes are very important for Pakistan’s needs,” she said.