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    Pakistan needs $10-15 bln fast, says PM's adviser

    21.10.2008 - 13:19 | Son Güncelleme:

    Pakistan requires $10 billion to $15 billion of support from foreign lenders to avert a balance of payments crisis, the country's newly appointed economic troubleshooter said on Tuesday.

    "In 24 months, we must correct the imbalance we have created," Shaukat Tarin, adviser to the prime minister on economic affairs, told Dawn News television.

    Pakistan is undergoing an annual economic health check-up, which all IMF members have to go through, but it is already in a critical condition, with the central bank holding barely enough foreign currency to cover six weeks of imports.

    Islamabad was expected to seek a multi-billion-dollar rescue package from the International Monetary Fund at a meeting between officials in Dubai on Tuesday.

    Other donors are expected to help if the IMF paves the way and approves Pakistan's economic strategy.

    Pakistan has already approached the World Bank, the Asian Development Bank and bilateral donors, including Saudi Arabia and China, for support. "Immediately we don't need more than $10-15 billion," Tarin said.

    Inflation in Pakistan is running close to 25 percent, the budget deficit is unsustainable, government borrowing from the central bank has squeezed liquidity in the banking system, and the international bond market has priced in a debt default.

    "The talks that are now taking place today will ensure that the Fund can act quickly should there come a request from the Pakistani authorities," said a source in Dubai with knowledge of the discussions underway.

    Consultations with the IMF were taking place in the Gulf because of a security scare posed by the Taliban and al Qaeda in Pakistan, and were expected for several days.

    Last month, an IMF team left Islamabad in a hurry after a suicide bomber killed 55 people and destroyed the Marriott hotel.

    The seven-month-old civilian government led by President Asif Ali Zardari has been trying to get IMF endorsement for its economic strategies in order to persuade other multilateral lenders and friendly countries to come to its rescue.

    But it hasn't wanted to take IMF money unless there was no other option. Potential donor governments are also scheduled to meet in Abu Dhabi next month, but Tarin last Saturday stressed the urgency of Pakistan's situation by saying Pakistan needed action in 30 days.

    Fears for the stability of the nuclear-armed Muslim nation virtually guarantee Pakistan a sympathetic hearing at the IMF.

    Pakistan's support is crucial in the war against al Qaeda and Islamist militancy, and for the NATO mission to stabilise neighbouring Afghanistan.

    Analysts say Islamabad needs up to $3 billion to $4 billion urgently to stabilise the economy, although the total financing gap for the balance of payments was projected at around $7 billion for the fiscal year ending June 30, 2009.

    Falling oil prices have helped, but there will be another hefty financing gap in fiscal 2010 to cover.

    Meekal Ahmed, a former IMF economist who also served with Pakistan's Planning Commission, said the government should stop dithering, and present its economic package. He said the IMF will probably ask Pakistan to tighten up its proposals.

    The fastest prescription, Ahmed said, was to "cut development spending, cut current spending, cut defence spending".

    Ahmed said that, regardless of the security crisis, Zardari should overrule resistance from Pakistan's powerful army to make sacrifices because defence was the biggest ticket on the budget.

    He said Pakistani economists have also recommended taxation of agriculture and the services sector, which must include real estate and the stock market, regardless of its current fragility.

    Pakistan's landed aristocracy has long resisted a tax on agriculture despite past pressures from the IMF and elsewhere.

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