Pak-Italy ink debt-for-development agreement
By Adnan Rafique

ISLAMABAD—The Government of Pakistan and the Government of Italy have signed an agreement Saturday in connection with debt-for-development Swap.
The agreement was signed by the visiting Italian Deputy Foreign Minister, Gianni Vernetti and Ms. Hina Rabbani Khar, Minister of State for Economic Affairs.
The debt subject to swap operations under this Agreement is of approximately $ 85 million which is 50 per cent of the total Italian debt (ODA amounting to around $ 160 million) that Pakistan owes to Italy.
It may be recalled that in May 2006 the Italians had already agreed for cancellation /adjustment of the first 50 per cent of the Italian debt towards GoP’s expenditure upto $ 85 million incurred on Afghan Refugees related projects.
This portion of loan will stand cancelled by the end of 2008. The servicing of the whole Italian debt (ODA) has however been stopped from May 2006 as agreed upon by the government of Italy.
As per the agreement signed Saturday, the loan under the swap is proposed to be off set in five equal annual tranches (2009-2014) commencing from the formal cancellation of first 50 per cent in 2008.
The payments eligible for swap operations will be made from budgetary resources of the Government of Pakistan and shall be spent on jointly agreed social and development projects.
Priority will be accorded to projects aimed at rural development, poverty alleviation and education. These include the projects of Federal Government, Provincial Governments or Local Governments, Non-Governmental Organizations or channeled by relevant U.N. Organizations such as Food and Agriculture Organization (FAO), International Fund for Agricultural Development (IFAD) and World Food Programme (WFP).
The above two debt cancellation/swap agreements reached with the Government of Italy is in accordance with the joint declaration issued during the visit of Prime Minister to Italy (13th to 15th July, 2005) which interalia include decision to speed up the finalization of the agreement for debt cancellation & debt swap agreement.