April 03, 2008	Thursday	Rabi-ul-Awwal 25, 1429

ISLAMABAD, April 2: Pakistan is facing serious balance of payments problems partly because the United States has not reimbursed the committed $500 million Islamabad has spent on account of the war on terror.

A well-placed source told Dawn on Wednesday that the amount should have been reimbursed last year, adding that the non-payment would create serious problems for the new government in controlling the rising budget deficit.

“Pakistan has been regularly receiving the reimbursement until March 2007 by the US authorities for the money it spent on military operations to combat militancy in tribal areas,” he said.

But it received only $281 million of $750 million in reimbursement in March this year, according to the source.

The finance ministry has placed the amount under the head of expenditure. The amount has been reflected under the account of non-revenue measures.

The source said the amount had been withheld despite the fact that Pakistan had already submitted details of the fund spent on the war on terror to the US authorities through its embassy in Islamabad.

A senior official told Dawn that the country had received $9.343 billion till December 2007 from the United States under different accounts from 2001-02. Of this, $5.042 billion had been reimbursed to Pakistan on account of the war of terror, which was not assistance. And an amount of $1.495 billion debt had been written off, he added.

Under the Camp David accord signed in 2003, the US agreed to provide $3 billion in assistance to Pakistan -- half military and half budget financing.

This means payment of $600 million per annum -- $300 each for military and finance assistance -- in five years.

However, the budget financing amount has been reduced to $200 million while $100 million has been directed to USAID.

The official said the US government had now decided to divert the remaining $200 million budgetary grant to USAID from the year 2007-08, adding to the problems of the new government.

Under the accord, it was agreed that $200 million would be paid to the Pakistani government for financing balance of payment and $100 million would go to USAID.

The official said this sudden change in the US policy would create serious problems for the new government in budget making and balance of payment.