April 16, 2009 / 11:47 AM / 8 years ago

Q+A - How will Pakistan's Friends, donors help?

Pakistani rangers close the gate after it was opened for trade at a crossing point on the military ceasefire line at Chakka-da-Bagh, about 250 km northwest of Jammu, October 21, 2008. REUTERS/Amit Gupta/Files

(Reuters) - Two meetings on Pakistan are being held in Tokyo on Friday with a Friends of Pakistan gathering in the morning and aid donors holding a conference in the afternoon.

Although they will involve many of the same participants and have the same overall objective, to help Pakistan, the two meetings will focus on different areas.

Pakistan’s economy hit trouble last year and it only averted a balance of payments crisis in November when it secured an International Monetary Fund (IMF) loan of $7.6 billion over two years.

Growth for the 2008/09 fiscal year ending in June is expected to be 2.5-3.5 percent, compared with 5.8 percent last year.

Inflation has eased from a record high of 25.3 percent in August to 19.07 percent in March. Foreign exchange reserves have risen to $11.17 billion from $6.6 billion in November.

Pakistan also met IMF targets and successfully completed its first quarterly review early this month.

While the economic data shows signs of improvement, one third of Pakistan’s fast-growing population, now at 160 million, live in poverty while militant violence is intensifying.

The central bank has forecast growth for the 2008/09 fiscal year ending in June will be 2.5-3.5 percent, compared with 5.8 percent last year.

WHO ARE THE FRIENDS AND WHAT ARE THEY DOING?

* The Friends of Pakistan group was set up in New York on Sept. 26, 2008, with the encouragement of the United States which wants to marshal political and economic support to promote Pakistani stability, which is key to security in the region.

* In particular, the group wants to help Pakistan foster economic development and fight terrorism.

* The group includes Australia, Britain, Canada, China, France, Germany, Italy, Japan, Saudi Arabia, Turkey, the United Arab Emirates, the United States, the United Nations and European Union.

* It is focusing on five areas: stability, development, Afghan border areas, energy and institution building.

* The Friends of Pakistan is not an aid pledging forum.

WHAT DOES PAKISTAN WANT FROM THE FRIENDS?

* Pakistan will aim to assure the Friends of Pakistan ministerial meeting of its commitment to tackling economic and security problems. President Asif Ali Zardari is expected to set out a medium-term “road map” for action on those issues.

* In conjunction with that, Pakistan is expected to present a prioritised wish-list of projects it has drawn up worth $30 billion which it wants to see implemented over the next 10 years.

* The list includes hydro-electric dams, roads and projects aimed at improving security.

* Pakistan has said it needs a “Marshall Plan” akin to U.S. spending in Europe after World War Two.

* Allies will reaffirm political support at the morning Friends meeting. Donors will make aid pledges in the afternoon.

HOW MUCH AID DOES PAKISTAN EXPECT?

* The donors conference, co-hosted by Japan and the World Bank, is focusing on bilateral aid in support of the $7.6 billion IMF loan.

* Pakistan is hoping for $4 billion to fill a financing gap with the aid to be focused on poverty alleviation, education and health. Those sectors have suffered under efforts to cut the fiscal deficit.

* If the aid were not to materialise, the poor would suffer but analysts say there is no tradition in Pakistan of mass unrest among the hungry. However, Islamist militants can find recruits from an ever-bigger pool of disaffected, unemployed young men.

WHO HAS GIVEN, OR WILL GIVE, WHAT?

* Japan is finalising plans to provide Pakistan with up to $1 billion in economic aid over the next two years, the Nikkei business daily reported on Saturday.

* The United States has pledged development aid of $1.5 billion a year for the next five years.

* The World Bank gave a $500 million interest free loan last month. It said in February it would lend Pakistan up to $2 billion this year.

* China gave $500 million in January to help Pakistan build foreign reserves.

* At donor meetings, countries sometimes re-pledge aid already committed as well as making pledges of new aid.

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