April 17, 2009 / 2:08 PM / in 9 years

Donors pledge over $5 bln for wobbly Pakistan

(For related factboxes, click [ID:nSP392927] and [ID:nSP415511])

* Donors pledge over $5 bln to Pakistan, more than expected

* Pakistan president says locked in tough fight

* U.S. pledges $1 billion over two years

By Chisa Fujioka and Yoko Kubota

TOKYO, April 17 (Reuters) - Pakistan secured more than $5 billion in fresh aid over two years at a donors conference on Friday 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. [ID:nISL424862]

"The participants 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 targetted 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 effectively.

"It is very important that these development resources are used in a way that they do reach the poor, that they do increase the productivity of Pakistan's economy, so that Pakistan can go back to a high growth path and to poverty reduction."

"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 said. -------------------------------------------------------------

For a graphic on Pakistan's slowing economy, click on

here -------------------------------------------------------------

"IF WE LOSE, YOU LOSE"

Nuclear-armed Pakistan is central to U.S. 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.

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 Zardari, the widower of assassinated former prime minister Benazir Bhutto.

"If we lose, you lose. If we lose, the world loses," he said.

U.S. special envoy Richard Holbrooke lauded the outcome of the donors gathering. "This conference is an extreme success," he told reporters.

"It's gotten a much better pledge than anyone expected," he said, adding that many countries such as Saudi Arabia and the United Arab Emirates had chipped in.

Japanese Prime Minister Taro Aso, who met Zardari for talks on Thursday, said he was impressed by the Pakistan president's resolve.

"I am convinced that the strong commitment by Pakistan itself will strengthen the resolve of the international community to support the civilian government," Aso told the gathering.

Speculation had simmered Iranian Foreign Minister Manouchehr Mottaki and U.S. special envoy Richard Holbrooke would have a chance to chat at Friday's gathering, but Holbrooke indicated there were no extensive talks.

"We ran into each other," he told reporters.

Pakistan has a wish-list of projects worth $30 billion it wants to see implemented over the next 10 years, including hydro-electric dams, roads and projects aimed at improving security in its violence-plagued northwest on the Afghan border.

The United States said it would provide $1 billion in aid over two years, subject to approval from Congress, matching a pledge from Japan. (Editing by Jerry Norton)





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