Pakistan approves $86 million grant for Kashmir region after violent protests

By Tariq Maqbool

MUZAFFARABAD, Pakistan (Reuters) -Pakistan Prime Minister Shehbaz Sharif approved a grant of 24 billion rupees ($86 million) on Monday for Pakistan-ruled Kashmir where there have been several days of violent protests over inflation.

A police official was killed and more than 90 people were injured when thousands of people clashed with police in the region over the weekend, said Shah Nawaz, a local government official.

Most businesses and transport remained shut for the fifth consecutive day on Monday, he said.

An alliance of civil rights groups has been leading the campaign, demanding the government give the region a subsidy on electricity and wheat prices in the face of rising inflation.

A statement from Sharif's office did not clarify how the grant would be used.

Kashmir's Prime Minister Anwar-ul-Haq Chaudhry later said that the amount would help extend a subsidy to the region.

The subsidised rate for 40 kgs (88.2 lb) of flour will be 2,000 rupees, down from 3,100 rupees, he said at a press conference telecast live by local TV channels. He also announced a substantial dip in the electricity prices as well.

This was a permanent arrangement, he said.

The protests coincide with the visit of an International Monetary Fund mission to negotiate a new long-term loan with Islamabad after it issued a warning that downside risks for the Pakistani economy remained exceptionally high.

Inflation slowed to 17.3% in April, below the government's forecast, which expects more improvement in the country's economic outlook in the coming months.

Inflation had risen as high as 38% in May last year.

The demonstrators, who started the rally on Thursday, have been gathering again since Sunday night in Dhirkot town in Poonch district, said Deputy Inspector General of police Shehryar Sikandar.

Dhirkot is about 80 kms (50 miles) south of Muzaffarabad, the region's capital city, which the protesters are threatening to march on if their demands are not met.

"They are in thousands," Sikandar told Reuters. "We are just monitoring them and have no policy to enter into any kind of direct confrontation."

Shaukat Nawaz Mir, a leader of the alliance, said the clashes started after the police used force against peaceful protesters.

($1 = 278.2500 Pakistani rupees)

(Reporting by Tariq Maqbool in Muzaffarabad; Writing by Asif Shahzad; Editing by Raju Gopalakrishnan and Emelia Sithole-Matarise)