Pakistan PM Gilani urges U.S. to write-off debt

ISLAMABAD, June 5 Fri Jun 5, 2009 8:58am EDT

ISLAMABAD, June 5 (Reuters) - Pakistan's prime minister urged the United States on Friday to write-off the country's debt, saying the war against Islamist militants and the displacement of tens of thousands of people had compounded economic woes.

Pakistan owed the United States $1.55 billion as of March 31, 2008, government figures show.

Islamabad launched an offensive to expel Taliban militants from the northwestern Swat valley last month in a move welcomed by the United States over worries that the nuclear-armed Muslim ally was sliding into chaos.

About 2.5 million people have been displaced by fighting in Swat and elsewhere in the northwest.

Prime Minister Yusuf Raza Gilani told U.S. special envoy Richard Holbrooke that the U.S. administration should expedite supply of military hardware to Pakistan and work with Congress to substantially increase economic assistance.

"(Gilani) has called upon the US to write off its debt to help the government of Pakistan overcome the present economic difficulties accentuated by the war on terror, growing crisis of IDPs and the negative impact of the global recession," according to a statement issued by Gilani's office.

Holbrooke had earlier announced that the United States aimed to give Pakistan $200 million, in addition to $110 million already pledged, to help it deal with the problems of the internally displaced persons (IDPs).

He said the United States would look into Pakistan's request for the debt write-off and measures were being taken to accelerate the pace of military supplies to Pakistan, the statement said.

Gilani acknowledged U.S. help for dislocated people and hoped that the European and Muslim countries would also come forward with assistance.

Pakistan is vital for U.S. efforts to defeat al Qaeda and Taliban in neighboring Afghanistan.

The United States has funneled $10 billion in aid to Islamabad over the past eight years and President Barak Obama's administration is calling for additional $1.5 billion in spending annually for five years to boost civilian development in Pakistan as part of strategy for the region.

(Reporting by Zeeshan Haider; Editing by Sanjeev Miglani)

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