After September 11, 2001, and Pakistan's proclaimed commitment to fighting terror, many international sanctions, particularly those imposed by the United States, were lifted. Pakistan's economic prospects began to increase significantly due to unprecedented inflows of foreign assistance at the end of 2001. This trend is expected to continue through 2009. Foreign exchange reserves and exports grew to record levels after a sharp decline. The International Monetary Fund recently lauded Pakistan for its commitment in meeting lender requirements for a $1.3 billion IMF Poverty Reduction and Growth Facility loan, which it completed in 2004, forgoing the final permitted tranche. The Government of Pakistan has been successful in issuing sovereign bonds, and has issued $600 million in Islamic bonds, putting Pakistan back on the investment map. Pakistan's search for additional foreign direct investment has been hampered by concerns about the security situation, domestic and regional political uncertainties, and questions about judicial transparency.
U.S. assistance has played a key role in moving Pakistan's economy from the brink of collapse to setting record high levels of foreign reserves and exports, dramatically lowering levels of solid debt. Also, despite the earthquake in 2005, GDP growth has remained strong at 6.6% in fiscal year 2005/2006. In 2002, the United States led Paris Club efforts to reschedule Pakistan's debt on generous terms, and in April 2003 the United States reduced Pakistan's bilateral official debt by $1 billion. In 2004, approximately $500 million more in bilateral debt was granted. Consumer price inflation eased slightly to an average of 8% in 2005/06 from 9.3% in 2004/05.
