US aims to restructure, not cut aid to Pakistan

The Bush administration plans to try to stave off growing calls to cut aid to anti-terror ally Pakistan by proposing a broad overhaul in the way billions of dollars annually is distributed, officials say.

Hopeful that President Pervez Musharraf will soon lift emergency rule, possibly as early as next week, US officials are close to settling on a strategy that would not reduce assistance but impose tough new conditions and limit or eliminate direct payments to Pakistan's government, officials have said.

Such a step would affect hundreds of millions of dollars that currently flow into individual Pakistani agencies, including the defence and interior ministries, with only cursory US supervision and understanding of where it is spent, officials said.

The US has provided nearly $10 billion in aid to Pakistan since 2001, and President George W Bush's proposed fiscal 2008 budget would have Pakistan receive a baseline amount of $785 million in aid.

The administration is asking for another $60 million in a supplemental request. Of the total, some $200 million is delivered directly to the government by the state department.

Hundreds of millions more come from the Pentagon. But instead of direct transfers money would be used to pay for specific "earmarked" items."