U.S. near end of Pakistan aid review, focus on energy
WASHINGTON (Reuters) - The United States expects to complete a review on how to spend $7.5 billion in proposed aid for Pakistan by the end of this month, with an early focus on the country's decrepit energy sector, senior U.S. officials said on Wednesday.
Chronic power shortages are a big political issue in Pakistan. They undermine growth potential, economists say, and weaken support for the fragile civilian government.
U.S. officials involved in the review declined to say how $1.5 billion a year in new funds would be allocated but made clear that infrastructure projects, particularly electricity, was an important part of the review.
"Energy will be a major focus," said one senior official. The aid has been signed into law but Congress has yet to appropriate the money.
"It (energy shortages) affects people, it affects people's perception of their government and manufacturing and jobs -- everything," added the official, who according to State Department rules asked not be quoted.
Last month, a U.S. delegation traveled to Pakistan to work out priorities in resolving the energy crisis. The issue is seen as a test of Pakistan's government, which is battling militants and helping the United States in its fight against al Qaeda and the Taliban in neighboring Afghanistan.
U.S. Secretary of State Hillary Clinton, during a visit to Pakistan last month, announced $125 million in new aid to upgrade power stations and transmission lines, part of a broader effort to reduce power shortages.
Washington hopes such support will help Pakistan's government make tough decisions, including unpopular increases in electricity tariffs, said one official.
The International Monetary Fund's quarterly report from July 31 on Pakistan's economic performance recommended three price hikes. The first was on October 1 and according to the IMF, there is agreement for two more.
OTHER PROGRAMS
Other U.S. funds will go to improve health, education, water management and roads.
U.S. aid to Pakistan has previously been channeled mostly through U.S.-based nongovernmental groups or contractors, but the Obama administration plans to rely more on local Pakistani organizations and the government.
"It's about how we get Pakistani ownership, leadership and sustainability," one U.S. official said. "We want to be sure that we are hand in glove with the government in helping them to deliver services."
That change has sounded alarms in Congress, which has pushed for stringent safeguards to ensure the money is not lost via corruption.
"We are taking that very seriously," said the State Department official.
Pakistani auditors vetted by U.S. inspector generals were seeking Pakistani institutions with the capacity to deliver aid and proper accounting mechanisms, said the official.
U.S. aid groups, afraid they will lose out on the new funds, say they are concerned there will not be enough U.S. government staff on the ground to oversee the funds.
But the senior U.S. officials said the U.S. Agency for International Development planned to double its staff in Pakistan to more than 60 in the next two years to handle this new workload.
(Editing by Alan Elsner)
