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US cuts Pak aid, IMF funds uncertain

David Storey in Washington

The United States said it had halted all but a tiny slice of aid to Pakistan in response to the military takeover but was undecided on whether to oppose International Monetary Fund loans.

State department spokesman James Foley yesterday said under Section 508 of the Foreign Assistance Act, the US government is obliged to halt aid when an elected government is overthrown, but this did not cover lending through international bodies.

The ruling is essentially symbolic because US sanctions on Pakistan dating back to 1990, which were strongly reinforced after last year's nuclear tests, have reduced US aid to less than $ 5 million.

Foley said $ 1.7 million for a Pakistani non-governmental health initiative would be stopped. The only aid that will remain is $ 2.5 million for the counter-narcotics programmes.

On further disbursements under a $ 1.5 billion IMF loan approved in 1997, he said, ''We are frankly in a wait-and-see mode, in terms of how we would... act or how we would vote in the event if future lending is to come up at the IMF.''

Foreign aid has become increasingly important in Pakistan, whose economy has deteriorated badly in recent years.

The IMF has held up payments because it says its economic conditions have not been met. It says it neither accepts nor rejects working with a military government in Pakistan.

IMF spokesman Thomas Dawson has said the fund, which loaned money to Pakistan's military rulers some 19 years ago, would not act alone if the international community believed aid would now be a bad idea.

Foley said, ''I would note that we will be in close consultation with friends and allies and other members of the IMF board'' on further disbursements.

The United States has some 18 per cent of the votes at the IMF. This is enough to block major policy decisions but not enough to halt individual loan payments if other countries are determined to push ahead.

But the IMF board rarely votes on individual loans, acting by consensus rather than by majority decisions.

Trade and development programmes as well as any assistance through the overseas private investment corporation have been suspended.

Reuters

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