updated 10/24/2003 6:30:41 PM ET 2003-10-24T22:30:41

Pakistan said Monday it plans to repay $1.08 billion of its debt to the World Bank and the Asian Development Bank ahead of schedule to free up money for social programs.

Pakistan’s Foreign Exchange reserves surged to an all-time high of more than $11 billion after the country joined the U.S.-led coalition against terror in 2001. Its alliance with Washington triggered a surge in foreign aid and debt rescheduling by Western nations.

Pakistan used to spend a major chunk of its foreign exchange earnings on servicing its foreign loans. Reducing that debt would cut the amount the nation has to spend on interest payments.

“After this prepayment there will be more fiscal space available for the development and social spending,” Finance Minister Shaukat Aziz said.

The government plans to pay the Asian Development Bank $596.7 million for seven loans scheduled to mature between 2005 to 2013, with interest rates ranging from 6 percent to 11 percent, he said.

The World Bank will be paid $481.7 million for 11 loans, maturing between 2007 to 2019, with interest rates ranging from 4.6 percent to 7.6 percent.

In its annual budget in June, Pakistan announced that it plans to repay $4.5 billion of foreign debt ahead of schedule in the next few years.

The country aims to reduce its foreign debt to $33.5 billion, from the current $35 billion, by the end of this fiscal year, which ends June 30.

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