Pak approaches I.M.F.; seeks financial aid

Islamabad, Oct 20 (PTI) With its currency hitting its
lowest ever and foreign exchange reserves falling, Pakistan
has approached the International Monetary Fund (I.M.F.) to
seek financial aid and also presented a programme for market
reforms.

The move by Islamabad comes as it is also approaching
Western and Gulf donors for rescue packages at a time when its
foreign exchange reserves fell to a six-year low of less than
eight billion dollars.

Experts have said Pakistan's foreign exchange reserves,
in real terms, are barely adequate to cater for imports for
one-and-half months.

U.S. and diplomatic sources in Washington told the
influential Dawn newspaper that President Asif Ali Zardari had
returned from his recent visit to China without a commitment
for aid needed to shore up the economy. Faced with the
possibility of defaulting on current account payments,
Pakistan had no option but to seek money from the I.M.F.

"The outlines of the programme will emerge during
this week. The I.M.F. is expected to convey its opinion to
Pakistan by Tuesday or Wednesday," said a source familiar with
Pakistan's talks with the I.M.F.

An IMF-backed plan will require Pakistan to cut spending
and raise taxes, among other measures, and this could hurt the
poor. Pakistani officials engaged in negotiations with the
I.M.F. and other donors said they had had "very
positive" talks.

"We will get out of the wood," said one official. "We
may or may not take money from the I.M.F. but we are seeking
their endorsement because it will help us get assistance from
others."

Another official noted that China, considered Pakistan's
strongest ally, had refused to provide financial aid without
conditions. "People should realise that when even China is
unwilling, others are not going to come forward...Economic
realities determine relations with other governments and
international financial institutions, not romance," he said.

Pakistan is engaged in "very delicate negotiations on all
sides, with I.M.F. officials, with other governments and we
remain optimistic", another official said.

Pakistan hoped to get support from the Friends of
Pakistan group, formed last month to help the country overcome
its economic problems, the official said. The group is
scheduled to hold its first working session in Abu Dhabi in
the first week of November.

"We also hope to get standby facility from the IMF," said
the official. He said Shaukat Tareen, financial advisor to the
Prime Minister, had "very positive" discussions with IMF and
World Bank officials in Washington last week.

Other experts, including former finance minister Shahid
Javed Burki, have advised Pakistan not to enter into an IMF
programme. "The IMF conditions will constrain Pakistan," Burki
said. "At this stage, Pakistan needs to avoid constraints. The
government should have a free hand to spend on power
development, creating employment and on other similar
measures."

An official involved in talks with the I.M.F. said while
the government respected Burki's point of view, it wanted to
keep its options open. "The IMF is not our first preference.
It is true that the Fund places tough conditions but other
donors will have conditions too," the official said.

The official noted that in 1999, the government of former
military ruler Pervez Musharraf faced a similar situation and
was forced to borrow money from the I.M.F. "I.M.F.'s
assistance is like credit approval," the official said. "If
you have this approval, others will assist you as well." PTI
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