Pakistan counts cost of war

Pakistan's is facing a financial squeeze

Pakistan's Finance Minister Shaukat Aziz says he estimates the crisis in Afghanistan could cost his country up to $2.5bn dollars.

He was speaking after a three-hour meeting with US Secretary of State for Economic Affairs, Alan Larson. Mr Aziz says their main discussion was about relieving Pakistan's huge foreign debt which runs at more than $30bn.

Ever since Pakistan pledged its full cooperation for the American led coalition, it has received praise and promises of financial support from many governments.

Many in Pakistan fiercely oppose the government's support of the US

Mr Aziz said the government was not looking for rewards, but he did emphasise that the crisis could cost the country dearly - possibly up to $2.5bn dollars in this financial year.

The minister said exports of textiles, carpets and other goods have been hit, as consumer confidence had dropped, and consumption inside Pakistan had also fallen.

He said they also expected foreign investment to go down, and privatisation plans to be delayed.

Debt relief

About 40% of Pakistan's annual budget is taken up with interest payments on foreign debt.

Mr Aziz said most of his talks with Mr Larson had focused on debt relief.

For his part, Mr Larson said the US intends to support Pakistan in its debt reduction negotiations with the Paris Club, a group of creditor governments from major industrialised nations.

Pakistan's bilateral debts to other countries total about $12.5bn, of which $3bn is owed to the US.

Long term commitment

Mr Larson also said the US would open its markets to textile exports from Pakistan.

Textiles are Pakistan's largest export - cotton yarn and fibre together account for 25% of the total - while the US is the South Asian nation's biggest market, taking 25% of Pakistan's total exports.

Alan Larson: Long-term commitment

The Pakistani minister said any debt relief would give his country more scope to spend on education, health and other social services.

The United States has already lifted sanctions imposed after Pakistan's 1998 nuclear tests. Mr Larson told journalists Pakistan had a huge potential to become a dynamic economy.

Some have expressed fears that the US might abandon Pakistan once the current crisis is over. But Mr Larson stressed it was a long-term commitment.