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Pakistan Enhanced Partnership Agreement (Pepa)

Islamabad, October 4, 2016 – The United States Agency for International Development (USAID) and the Ministry of Finance signed the latest amendment to the Pakistan Enhanced Partnership Agreement (PEPA) on September 16, the document by which the U.S. government provides development assistance to Pakistan. The agreement allocates an additional US$407 million to support U.S. and Pakistani government initiatives to improve critical infrastructure, create economic opportunities and pursue economic and political reforms that promote prosperity. However, following the signing of the PEPA agreement between Pakistan and the United States, relations began to deteriorate and this deterioration in relations also affected the commitments and aid plans promised to Pakistan under the Kerry Lugar Act. Officials from the Ministry of Economy have found that PEPA is one of four agreements under which Washington provides non-military economic assistance to Pakistan. The total amount of aid commitments in the four U.S. aid programs since 2001 is $8.2 billion, and the amount that has been paid to date is $6.6 billion. Shortly after the PEPA agreement came into force, Pakistan-U.S. relations deteriorated to near the lowest level in decades. This has also had an impact on actual KLB commitments and payments. The agreement, reached on September 16, represents an additional $407 million to support U.S.

and Pakistani government initiatives to improve critical infrastructure, create economic opportunities and pursue economic and political reforms that promote prosperity, according to a press release released here on Tuesday. USAID`s programs, which will be supported by this agreement, have been developed in consultation with the Pakistani government and support the Pakistani government`s 2025 vision, which sets out a roadmap for a prosperous Pakistan. The sources showed that due to the slowness of payment and the use of aid, USAID would likely be able to use the total amount within a year. That is why the federal government has renewed its agreement with Washington. The sources added that the Ministry of Economy was considering the proposal to conduct periodic reviews of U.S.-funded projects; an initiative that has not been implemented for several years. According to Ministry of Economy sources, the $440.2 million reduction is expected to have a serious impact on future USAID projects across Pakistan. Of the $4.1 billion in the reduced payment, Pakistan still has to use $900 million in aid. The sources said that prior to the new reduction, KLB`s commitments amounted to nearly $4.5 billion, which has now fallen to $4.1 billion. But actual payments, including the non-budget, reached only $3.2 billion, they added. The 2015 IGO report indicates that about 30% of PEPA grants in Pakistan have not met their targets, while 55% of the funds have only partially met their targets. Due to the weakness of bilateral engagement and USAID`s increasing reliance on contractors to carry out this task, budget support has declined significantly and accounts for less than a quarter of total civilian aid to Pakistan.