Pakistan secured more than $5 billion in fresh aid over two years at a donors' conference today 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 at the aid conference, hosted in Tokyo by Japan and the World Bank, 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 targeted 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 to help the poor and increase productivity to restore high growth, while tax reform to boost revenues was also vital to reduce dependence on outside aid.
"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 told a news conference.
Nuclear-armed Pakistan is central to President Barack Obama's plan for South Asia. That plan includes trying to stabilise Afghanistan where Taliban militants, many operating from lawless enclaves in northwest Pakistan, have thrown the effort into doubt.
Mr Zardari assured Islamabad's allies that Pakistan would do its utmost to deliver on economic reforms and fighting militants.
"Despite the fact that I lost the mother of my children, I have taken up this challenge . . . to lead Pakistan out of these difficult times," said Mr Zardari, the widower of assassinated former prime minister Benazir Bhutto.
"If we lose, you lose. If we lose, the world loses," he said.
Reuters