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Pakistan seeks aid from IMF

It turns to the global agency to help it avoid defaulting on its bonds. The loan amount has not been determined.

October 23, 2008|The Associated Press

ISLAMABAD, PAKISTAN — Pakistan has sought help from the International Monetary Fund to avoid a possible economic meltdown brought on by high fuel prices, dwindling foreign investment and soaring militant violence.

Pakistani officials had said turning to the IMF to avoid defaulting on billions of dollars of government bond payments due in the coming months would be a last resort.

Aid from the agency often comes with conditions such as cutting public spending that can affect programs for the poor, making it a politically tough choice for governments.

In a statement Wednesday, the IMF said Pakistan had requested help "to meet the balance-of-payments difficulties the country is experiencing." It said the size of the loan request had not been determined and that talks on the package would begin in a few days.

Pakistani economists say as much as $5 billion is needed to avoid defaulting on government bonds due for repayment next year.

The country has also asked for loans from wealthy nations and multilateral agencies such as the World Bank.

Analysts say the country will probably get that help as well because of its front-line status in the U.S.-declared war on terrorism.

Any default would further shake local and international confidence in the government and the economy at a time of intense fighting against Al Qaeda and Taliban militants near the Afghan border.

High oil prices and dwindling investment from overseas have triggered a balance-of-payments crisis that is undermining the Pakistani currency, the rupee. The country has also been battered by high inflation and chronic power shortages.

The total amount of foreign currency in Pakistani banks has fallen by more than half since last year, to $7.75 billion.

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