Pak may ask IMF for aid after being refused by China: report

New York, Oct 19(PTI) Refusal by Islamabad's staunch
ally China to provide cash to shore up its economy has left
Pakistan President Asif Ali Zardari with unpopular prospect of
having to ask the International Monetary Fund (I.M.F.) for
help, a media report said Sunday.

Zardari, who has just returned from a visit to China,
had hoped that Beijing would provide between USD 1.5 billion
and USD 3 billion in much needed cash, the report said, adding
that China put cold water on his expectations.

Islamabad, the New York Times said, was seeking aid
from China as it faces the possibility of defaulting on its
current account payments.

With the major donors focused on financial crisis, the
report said, Pakistan's argument that it needs the money to
counteract terrorist threat also does not cut ice.
The infusion of cash, the paper said, would have
helped with payments for oil and food as currency reserves
dwindle.
Economic hardship has been mounting across Pakistan
for several months. Electricity shortages have become so dire
that even middle-class families in big cities have to ration
supply, with power cuts for 12 of every 24 hours, with one
hour on, and one hour off, the report said.

Food prices have soared, making some basics, even
flour, too expensive for the poorest to afford. No large-scale
riots have occurred, but concern is mounting that such
protests are not far off.

With the United States and other nations preoccupied
with financial crisis, and Saudi Arabia, another traditional
ally, refusing to offer concessions on oil, China was seen as
the last port of call before the I.M.F., the New York Times
report said, adding accepting a rescue package from the fund
would be seen as humiliating for Zardari's government.

An I.M.F.-backed plan would require Pakistan's
government to cut spending and raise taxes, among other
measures, which could hurt the poor, officials were quoted as
saying.

The Bush administration, the report said, is concerned
that Pakistan's economic meltdown will provide an opportunity
for Islamic militants to capitalize on rising poverty and
frustration.

The Pakistanis have not been shy about exploiting the
terrorist threat to try to win financial support, a senior
official at the I.M.F. said, stressing that because of the
dire global financial situation, and the reluctance of donor
nations to provide money without strict economic reforms by
Pakistan, the terrorist argument has not been fully
persuasive.

"A selling point to us even has been, if the economy
really collapses this is going to mean civil strife, and
strikes, and put the war on terror in jeopardy," the official
was quoted as saying by the paper.

"They are saying, 'We are a strategic country, the
world needs to come to our aid'," he said.

The new government, the paper said, has reduced
subsidies on fuel and food, and the central bank moved on
Friday to ease an intrabank liquidity crisis.

In addition, new rules were imposed several weeks ago
on the Karachi stock exchange to stop sell-offs.

But none of those steps have stanched the crisis in
confidence.

The central bank's currency reserves, the Times said,
have dipped to USD 4 billion, enough to cover payments for oil
and other imports for about two months. As it became clear
over the past two days that the Chinese were not going to
provide a cushion for Pakistan, the rupee slumped to a record
low.

The thin results from the China trip were of little
surprise to Western donors, the paper said.

The Times said asked about the likelihood of Pakistan
winning the direct cash infusion it was seeking, a senior
Chinese diplomat was reported by Western officials to have
said, "We have done our due diligence, and it isn't
happening."

"What we needed is USD 3 to USD billion," Sakib
Sherani, a member of the government's economic advisory panel
and chief economist at ABN Amro Bank in Pakistan, was quoted
as saying. The amount was necessary "to build confidence," he
said.

The central bank governor, Shamshad Akhtar, told the
paper "We are very open to all kinds of financial support."

She added, "We've taken a lot of corrective actions,
and we plan to take more."

But Zubair Khan, a former commerce minister and a
critic of the government's economic management, was quoted as
saying confidence would improve once Pakistan arranged an
I.M.F. rescue package. PTI