WASHINGTON (AFP) — The International Monetary Fund moved Wednesday to bail out cash-strapped Pakistan in the Fund's first bid to shore up an Asian economy following global financial turmoil.
The Washington-based fund said Pakistan had sought its help to deal with a balance of payments crisis, which had raised the prospect of the violence-hit country defaulting on its foreign debts.
"The Pakistani authorities have requested discussions with the IMF on an economic program supported by financial assistance from the fund to meet the balance of payments difficulties the country is experiencing as a result of high food and fuel prices and the global financial crisis," IMF managing director Dominique Strauss-Kahn said in a statement.
"A fund mission will begin discussions with the authorities in the next few days on a program aimed at strengthening economic stability and enhancing confidence in the financial system," he said.
Strauss-Kahn said the amount of IMF financing had yet to be determined but reports said that Pakistan needed as much as 15 billion dollars for up to three years to extricate themselves from a severe financial crisis.
About four billion dollars of that was required in the next month.
"We are in dire need of dollars so the situation is that we have no choice," a senior Pakistani government official said in Islamabad, speaking on condition of anonymity.
IMF officials were holding talks with Pakistani officials in Dubai which could last a "few days" and a bailout package worth "about half" of what is required by Pakistan could be arranged by the IMF within two weeks, sources told AFP.
Dwindling foreign currency reserves can cover the nuclear-armed Islamic republic's import bill for only six more weeks, and Pakistan's new civilian administration admits rapid action is required.
"Financing could be made within framework of the fund's Emergency Financing Mechanism," Strauss-Kahn said, referring to a fast-track process that the IMF has revived to help countries experiencing economic problems from the global financial crisis.
"Emergency financing is done fairly quickly, possibly within two weeks, and the Dubai meeting will basically determine the amount of financial assistance required ahead of a board decision," one source said.
The Financial Times reported on Tuesday that Pakistan was in "informal discussions" with the IMF and other bodies over a 10 to 15 billion dollar international support package designed to stabilize its economy.
Just over half would come in the form of an IMF loan while the rest would come from the World Bank, the Asian Development Bank and donors including Saudi Arabia, the report said.
The move to shore up the Pakistani economy is the first in Asia by the IMF since financial crisis spread across the globe triggered by a US home mortgage debt conundrum.
The fund is also nearing agreements to make emergency loans to Iceland and Ukraine and discussing an aid package with Hungary in moves that would draw its direct involvement in helping to contain the global crisis.
During the 1997-98 financial crisis in Asia, the IMF loaned billions of dollars to Indonesia, Thailand and South Korea to cover their foreign exchange denominated debt.
Pakistan's finances have "deteriorated significantly," according to an IMF report released this week, due to recent political instability, Islamic militant violence, and high oil and food prices.
Its foreign reserves have sunk from 14.3 billion in June 2007 to 4.7 billion in September 2008, while the rupee has lost 25 percent of its value this year and the stock market has dropped 35 percent, it said.
Pakistan's precarious financial situation has caused worldwide alarm due to its role as a key ally in the US-led "war on terror" and its position as the Islamic world's only nuclear power.
A group of bilateral donors known as the "Friends of Pakistan" -- including China, the United States, Britain and the UAE -- pledged in September to help the country to stabilize.
But the top US diplomat for South Asia, Richard Boucher, warned on Monday that any aid from the group is "not a cash advance" and would be carefully targeted.
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