PAKISTAN: Stakes high in Paris aid talks

04 March 1994

The government was seeking commitments of about $2,500 million in new assistance from donors and multilateral agencies during two-day annual aid consortium talks held in Paris at the end of February.

The meeting will be the first of its kind for almost two years and is considered an important hurdle for the four-month-old government of Benazir Bhutto. The talks were postponed twice in 1993, due to concerns that donors would be unwilling to make commitments because of political uncertainties.

The budget deficit rose to Rs 107,700 million ($3,600 million) or 7.9 per cent of gross domestic product (GDP) in the year ending 30 June 1993, mainly due to high defence spending and interest payments. A rise in public and private borrowing brought total debt to 86.1 per cent of GDP, slightly more than half of which is domestic debt (MEED 7:1:94).

The government is expected to present donors with its improvements in official foreign exchange reserves, which now exceed $1,200 million, up from the record low of $137 million in July 1993. It will also emphasise the reduction in official bank borrowings and the drive to improve tax collection. Bhutto has said that her government's policies will start showing results in 18 months.

Donors are expected to voice concern about the slow pace of the privatisation programme, excessive defence spending and press for more social spending.

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