ITALIAN IMPLEMENTATION OF PLEDGE FOR PAKISTAN

UNCLAS ROME 000763 SENSITIVE SIPDIS SCA/P: SPENCER SRAP: GOODMAN EEB: LEATHMAN PRM/ECA: HASTINGS E.O. 12958: N/A TAGS: EAID EFIN PHUM PK SUBJECT: ITALIAN IMPLEMENTATION OF PLEDGE FOR PAKISTAN REF: A. STATE 61218 ¶B. STATE 55536 ¶C. ROME 316 ¶1. (SBU) Summary: On 22 June Econoff demarched MFA Counselor Valter Zucconi of the Directorate for Development Cooperation on the delivery of funds Italy had pledged for Pakistan at the 17 April Tokyo Donors' Conference. According to Zucconi, Italy is in the process of disbursing 62 million Euros for Pakistan, most of which is in the form of soft loans targeted toward rural development in Baluchistan, the Northwest Frontier Province, and the Federally Administrated Tribal Areas. Of this figure, Zucconi said that a structure for spending about 40 million Euros will probably be accepted by the Government of Pakistan (GOP) by the end of July, after which rural infrastructure and community mobilization projects could begin in as few as three weeks. The GOP and GOI are not likely to finalize a structure for allocating 20 million Euros in soft loans pledged for professional, technical and vocational training until November or December, so those funds will likely not be spent in this calendar year. Finally, a grant of 2 million Euros for developing the Pakistani olive oil industry is likely to be approved in July and commence shortly thereafter. End Summary. ¶2. (SBU) On 22 June Econoff delivered to MFA Counselor Valter Zucconi of the Directorate for Development Cooperation ref A demarche concerning funds that Italy had pledged for Pakistan at the 17 April Tokyo Donors' Conference. Zucconi had recently returned from a visit to Pakistan during which his team held negotiations with the GOP Economic Affairs Division of the Ministry of the Economy and Statistics. Both sides agreed to coordinate the disbursement of 40 million Euros in soft loans that Italy had promised for the Pakistani provinces bordering Afghanistan. This structure now awaits higher-level GOP approval. Zucconi's team had also consulted with its local Pakistani implementing partner, the Pakistan Poverty Alleviation Fund (PPAF),about the loans. In 1997 the World Bank and GOP created the PPAF, which is now financed by the International Fund for Agricultural Development, the World Bank, and other multi-lateral development organizations. By the end of the trip, Zucconi said his team had created an administrative system that would allow the PPAF to disburse the 40 million Euros in soft loans quickly, provided the GOP did not create last-minute "obstacles." If the GOP elects to object to the GOI-proposed administrative system for extending the soft loans, then new negotiations with the PPAF would be required and disbursement of funds would be postponed until September at the earliest, according to Zucconi. ¶3. (SBU) Zucconi agreed with ref A points that it was imperative to spend funds quickly. He said the PPAF had been chosen as an implementing partner because it had a proven track record. "We did not want to create new structures." Once high-level GOP approval is received, projects could begin to be approved within three weeks, Zucconi said. The other 20 million Euros in soft loans will not be disbursed soon, because an Italian technical delegation must visit Pakistan, then an agreement must be signed between the GOI, GOP, and an implementing partner. Zucconi described a timeline for disbursing the remaining pledged funds as beginning with an agreement in November or December of this year, with professional, technical and vocational training commencing early in 2010. DIBBLE