The three-year PRGF arrangement announced by the IMF will be financed through a variety of bilateral and multilateral arrangements, many of which are still under discussion. Though the program has not been officially approved, Pakistani officials in Washington are optimistic about the outcome. "Essentially the talks were successful," a spokesman at the Pakistani embassy said. "Technically the agreement is reached, but the board [of the IMF] has to approve it."

The IMF's PRGF loans, formerly referred to as "structural adjustment" loans, are awarded after the Fund reviews a paper submitted by the country seeking the aid, which outlines the government's comprehensive strategy for reducing poverty. The PRGF loans carry an interest rate of 0.5 percent and are re payable over a ten-year period.

The World Bank's $300 million grant follows a loan of $250 million in 1997, also aimed at reforming the banking sector. The goal of the World Bank's project is to encourage high quality loans and to make nationalized commercial banks more efficient and profitable.

"All Pakistan's citizens deserve to have access to secure banking and credit," said Joe Pernia, a South Asia specialist at the Bank. "Achievement of the country's vision for a healthy and efficient banking system will give them that while eliminating abuses in the system," he said.

The initiative is part of the World Bank's broader national reform program in Pakistan, to which it has contributed $374 million. The Bank said it plans to augment its overall lending program with Pakistan in the next fiscal year.

The Pakistani delegation, which arrived in Washington on October 8th and stayed for more than two weeks, included the Finance Minister, Shaukat Aziz and the head of Pakistan's central bank. Mr. Aziz participated in the initial meetings but later left Washington to participate in US Secretary of State Colin Powell's visit to Pakistan. The Pakistani officials met with a variety of US agencies, including the Treasury Department, the State Department, the United States Agency for International Development (USAID) and the US Export-Import Bank, to discuss potential aid programs aimed at providing relief for Pakistan's ailing economy.

Officials at the Pakistani embassy in Washington stressed that the Pakistani government is not trying to leverage its crucial role in the war on terrorism to amass large sums of international aid. "This was not a shopping trip or a demand-list presentation," the embassy spokesman said. "A lot of people thought Pakistan came here with a wish list, but that's not true." In fact, the official noted, Pakistan's financial team approached the discussions with an open mind and did not come to the bargaining table with specific aid proposals.

IMF officials indicated that the new PRGF proposals -- and other bilateral aid proposals Pakistan is currently negotiating -- are intended, in part, to relieve the economic difficulties Pakistan has suffered as a result of its role as a front line ally in the American war on terrorism. An IMF spokesman said the program will "help Pakistan cope with the economic and financial fall-out of the events in Afghanistan, such as higher insurance costs for exports and imports, as well as weaker world demand."

But the Pakistani embassy spokesman downplayed the role of September 11 and the ensuing costs Pakistan has absorbed, saying they were not the catalyst for the talks. He said these aid discussions are not anything out of the ordinary and that Pakistan has had similar meetings with the IMF in the past few years. "Many things happened because of September 11th that would have resulted through the normal course of time," he said. The official also pointed out that prior to September 11 the IMF was already planning to meet with Pakistani officials to discuss new aid programs.

The IMF indicated a key reason for its consideration of the PRGF package was Pakistan's demonstrated commitment to its own economic reform program, which IMF officials say has shown promise. The World Bank concurs that Pakistan is on the right track with its current reform agenda and says its confidence in Pakistan's efforts are a primary reason for its new lending imitative. "Over the past two years, Pakistan has been implementing a national reform program demonstrating its commitment to addressing long-standing problems of poverty, education and health and.corruption and other policy and institutional constraints to business activity and growth," a Bank spokesperson said. "We have been impressed by the program."

Pakistan's economy, however, remains mired in stagnant growth and rising poverty rates. The World Bank says the country's annual GDP growth, which averaged about 5 to 6 percent through the 1980s, has plummeted to less than 3 percent, which the Bank says is insufficient to reduce poverty among Pakistan's growing population. Other problems include the country's massive foreign debt, which stands at $37 billion (100 percent of GDP), and widespread tax evasion that results in insufficient government revenues.

The social problems resulting from the economy's dismal state are equally grave. Pakistan ranks 160th in the world in per capita income for its population of 140 million ($458 per year). Widespread illiteracy (only 40 percent of the population can read), high infant mortality rates, and one of the world's highest population growth rates compound the problems policymakers face.

Final discussions are underway to work out the details of the lending programs for Pakistan. Officials at the US State Department say the amount of America's specific contribution is being worked out. Mr. Aziz, Pakistan's Finance Minister, will be holding discussions in Paris in the near future to finalize bilateral lending agreements with other countries.

The announcements by the IMF and the World Bank follow a series of positive developments for Pakistan in the last several weeks. The US Congress lifted many of its economic sanctions on Pakistan recently, paving the way for substantive American aid, and the US has also eased import restrictions to boost Pakistani exports. Previously, the US also delivered $100 million in emergency economic assistance to Pakistan and made a $135 million credit payment to the IMF, the last in Pakistan's current "stand-by" program.