Islamabad: The US on April 5 waived off $ 1 billion debt and rescheduled the remaining $ 2.3 billion to be paid in easy instalments in 38 years, fulfilling Washington's promise on this regard for Pakistan's co-operation in the war on terror.

US Ambassador to Pakistan Nancy Powell signed the agreement with Secretary of Pakistan's Economic Division Waqar Masood Khan.

The debt write-off, promised by US President George W Bush last year to his Pakistani counterpart Pervez Musharraf, was delayed by several months after it got entangled in lengthy debate in US Congress.

"The United States is in Pakistan for the long-term...the new relationship between the US and Pakistan is not just about September 11. It is about rebirth of long-term relationship between our two countries," Powell said.

Pakistan, which has over $ 36 billion external debt, owed around $ 3.3 billion to United States and its lending agencies. Of this, US has written off $ 1 billion and rescheduled the remaining $ 2.3 billion to be repayable in 38 years including 15 years grace period at concessional rate of interest.

Stating that the debt write-off would provide significant relief to Pakistan's cash- starved economy, the country's Finance Minister Shoukat Aziz said so far US and its allies have written of $ 1.62 billion worth of Pakistan's debt, which would improve Islamabad's debt sustainability.

PTI