Economic support follows stand against terrorism

ISLAMABAD, 26 September (IRIN) - Pakistan is to be provided with 20 million euros (approximately US $18 million) in emergency aid to help it cope with an anticipated Afghan refugee crisis, following a high-level European Union (EU) mission to the Pakistani capital, Islamabad, but the country expects that this will be part of a much larger economic boost from the EU, including free market access to Europe.

'The Dawn' daily newspaper reported on Wednesday that Pakistan was anticipating a package which would include full access to the markets of the EU and the US, and sizeable external debt relief rather than normal rescheduling. Pakistani Finance Minister Shaukat Aziz told the EU mission that Pakistan could not recover economically so long as it was burdened with a US $36 billion debt, AFP reported on Tuesday.

According to AFP, the EU mission had confirmed to Pakistan that it wanted to boost business and trade links, and to upgrade political relations with Islamabad, and that it would ask EU governments to "look sympathetically" at Pakistan's demand for greater access to European markets for its textile sector.

The EU delegation, comprising Belgian Deputy Prime Minister and Minister of Foreign Affairs Louis Michel, who is also acting President of the EU Council of Ministers; Spanish Minister of Foreign Affairs Joseph Pique; European Commissioner for External Relations Chris Patten; and Secretary-General of the EU Council of Ministers, Javier Solana, is visiting Pakistan, Iran, Saudi Arabia, Egypt and Syria this week. The aim is to explain the EU plan of action in the fight against terrorism, to secure confirmation from the countries visited that they will support the fight, and to demonstrate the EU's concern over the situation in the countries in that region, and its willingness to help them.

Local media also reported on Wednesday that the US had agreed to consider ways of providing market access for Pakistani products through the removal of duty and quota restrictions, but that no firm commitment on these issues had been made.

On Friday, Japan announced 4.7 billion yen (about US $40 million) in emergency aid to help Pakistan's ailing economy, and to cope with new refugees from neighbouring Afghanistan. Japan also agreed to reschedule US $533 million of the official debt owed by Pakistan.

Japan said that it was providing the financial assistance in support of its cooperation in the US-led international coalition against terrorism in the wake of the terror attacks against New York and Washington on 11 September. The Saudi-born dissident, Osama bin Laden, who has been given sanctuary by the ruling Taliban regime in Afghanistan, has been named by the US as prime suspect for the attacks.

Pakistan has been commended internationally for standing firmly against terrorism, despite a significant domestic constituency which opposes its backing of the US. Pakistan has withdrawn its diplomats from the Afghan capital, Kabul, but the Taliban still has an embassy in Islamabad, while Pakistan remains the only country with diplomatic links with the Taliban - the United Arab Emirates and Saudi Arabia having severed their links since last weekend.

Last week the US announced it was lifting sanctions against Pakistan and India, imposed over nuclear tests in 1998. These include bans on foreign assistance, arms sales, government credits and US support for multilateral financial assistance. The US is now reported to be considering similar action in relation to democracy-related sanctions applied after Pakistan's 1999 military coup.

Pakistan also hoped for a positive decision this week on a US $136 million balance of payments credit from the International Monetary Fund (IMF). The Fund was considering the matter on Wednesday, and the US - one of its key members - was understood to have signalled that it would be voting in Pakistan's favour.