Helping hands: EU, Germany provide Rs40b assistance

Islamabad urged to do more as Europe sees ‘little progress in tax reforms’.

ISLAMABAD:

The European Union and Germany signed agreements on Friday, for providing Rs40 billion (315 million euro) assistance to Pakistan while urging Islamabad to implement strict reforms to get rid of external assistance as Europe sees “little progress in tax reforms”.

The assistance, above normal aid packages, would be spent in the northern part of the country on education, human resources, governance, trade, health, energy, rural and natural resource development. The entire EU assistance of 225 million euro grant would be delivered over three years while Germany’s 90 million euro, including 48.5 million euro as a soft loan, in a year.

Two different agreements were signed with the European Union and Germany for the packages on Friday.

“Germany sees little progress in tax reforms … as the key to the future is implementation of the reforms agenda that lies with the Pakistani leadership,” said Dirk Niebel the German Development Minister. The West and the Europe have been asking Pakistan to expand the tax base for a sustainable development. The International Monetary Fund $11.3 billion loan package is currently suspended due to non-implementation of tax and energy sector reforms.

Germany would give 48.5 million euro loan for energy sector, a grant of 13 million euro for health, 9 million euro for governance and 12 million would be pooled in Multi-Donor Trust Fund administrated by the World Bank. The EU assistance is under Multi-Annual Indicative Programme 2011-2013.

The EU committed 90 million euro for rural development and natural resources management, 70 million euro for education and human resources development, 50 million euro for governance and 15 million euro for trade development.

The German Minister said that Pakistan faces huge challenges. “One-third of population does not have access to reliable electricity, only small (segment of) population gets vocational training and only half of the population has access to medical care”, said Niebel.

He said if the population growth rate continued at the same rate all these problems would multiply. Pakistan’s population is growing at a rate of 2.1 per cent annually, according to the Economic Survey of Pakistan.

Responding to the German minister’s speech, the Finance Minister Hafeez Shaikh said Pakistanis have been bravely facing the brunt of the global war on terrorism and the international community should realise that.

Shaikh reiterated that external aid cannot resolve problems, adding that the best way EU can support is by easing trade barriers with Pakistan.

Shaikh said though the EU announced a trade concession package for Pakistan but it still needs to be implemented. He said to further build relations, the EU is required to extend level playing field to Pakistani exporters. The EU-offered trade package is struggling in the EU Parliament and the World Trade Organisation.

The EU Commissioner for Development Andris Piebalgs extended the block’s support for ongoing economic reforms and in smoothing the transition period. He also urged Islamabad to expand tax base for sustainable social development.

Published in The Express Tribune, June 18^th, 2011.