"Seeing it and realising that house after house has been destroyed, people have had to be moved into tents and some are still up in the mountains with the winter approaching, it is really a tragic and urgent situation and the scale is gigantic," Annan told reporters in Muzaffarabad.
He again urged delegates to a donors' conference in Islamabad on Saturday to contribute generously towards the $5.2 billion needed for reconstruction and relief.
"The figure seems big... But when you consider the magnitude of the task, it is not very much," Annan said at a UN camp of tents on the outskirts of Muzaffarabad, most of which has been reduced to rubble.
"I hope the governments, individuals and private organisations, those with capacity, will give and give willingly and generously to help our fellow human beings in need," he said. "When so many people are affected none of us should be indifferent."
The sum the recovery effort is expected to require was reached after an assessment by the UN and Pakistani agencies, the World Bank and the Asian Development Bank (ADB).
Annan said despite the "weak and tardy" response from the donors, he looked forward of meeting the target of $5.2 billion required for the reconstruction and rehabilitation of area affected by the October 8 earthquake.
"If we do not hit our target tomorrow, we need to keep trying, keep pressing donor governments, private sector and individuals to try harder, we just can't sit back and relax. I hope the results will be respectable," he told reporters.
Annan said he would appoint a special envoy to work with him on recovery and reconstruction in AJK and NWFP.
The secretary general had appointed the former US president Bill Clinton to work with him on the tsunami-affected countries.
About the response of international community, he said, "There is no doubt that donor response has been weak and tardy."
He said that within 10 days of the tsunami, the UN got 80 percent of the pledges as compared to mere 12 percent in case of Pakistan. Similarly, after a month the pledges for tsunami were oversubscribed, while for the October 8 earthquake that devastated people living in an inaccessible area of 30,000 sq-km, only 30 percent have been monetised.
Annan attributed the trend to "donor fatigue" who have been through a series of natural disasters, tourists from 50 countries were affected and their governments responded. Besides, he said, it was Christmas and the people were quite generous.
"Obviously, we have not succeeded ... there were various reasons ... perhaps that the response has not been as high as I would have expected," he added.
He said the international donors' conference would try to raise the required amount of money and the UN, other agencies and governments can assist and be "actively engaged" with Pakistan in the reconstruction and rehabilitation efforts.
The donors' conference, he said, would seek grants from the governments, while the international financial institutions would announce if they would provide soft loans or not.
He said the effort would take time and the support of international community must sustain the task and should be commensurate with the tasks.
"We look forward of getting generous pledges, that can be converted fairly quickly to cash."
He said there were not enough winterised tents across the world to meet the requirements of the people and it was essential that they are relocated to safer places, in view of the sub-zero temperature in the winters.
Annan, accompanied by his wife Nane, met survivors of the quake, telling some that the reconstruction effort should provide better housing than that lost in the quake. "We will do whatever we can," he said.
Musharraf praised Annan's efforts to mobilise world assistance for Pakistan, with donor fatigue after the last year's tsunami and Hurricane Katrina in the United States blamed for the relatively low-level response to the quake.
The president will unveil plans to handle the mammoth task of rehabilitating victims and rebuilding infrastructure at the Saturday's conference.
He said he would also spell out measures to ensure the money coming to the government for the quake was used correctly, including through the use of foreign auditors. There have been concerns about corruption.
Total "transparency and accountability will be ensured of every penny that we get," Musharraf said.
Annan said his visit had made him both impressed and depressed.
"Depressed by the number of houses that have been destroyed and will need to be rebuilt, but impressed by the level of co-operation and determination that I have seen this morning," he said.
"When you look at the terrain here and the logistical challenges that had to be overcome in order to get aid to the people, it is a really a gigantic task we have ahead of us."
Annan praised Pakistan Army for its crucial contribution to rescue and relief efforts, saying without its help "we would not be where we are today."
He said that the army and the civilian relief organisations had teamed up very well in undertaking large-scale operations following October 8 earthquake.
"It was heartening to see that the army and the humanitarian organisations worked well with each other in carrying out relief operations in difficult hilly terrain. They have extended extremely good co-operation," he said.
"I applaud the role of the army. Without their help, especially in terms of logistical support, we would not be where we are today," Annan said.
During their visit, Annan and Musharraf were briefed about relief efforts in the mountainous region. Annan will address a major donors' conference in Islamabad on Saturday.