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By Barry Newhouse
22 October 2008
Pakistan holds talks this week with the International Monetary Fund about what is expected to be an estimated $10 billion bailout package. With foreign currency reserves dwindling and the rupee trading at all time lows against the dollar, Pakistan is in danger of defaulting on its debt. VOA's Barry Newhouse reports from Islamabad that the country's traditional donors are not offering any immediate aid.
Pakistani officials say that because of the country's central role in the war against terrorism, shoring up its economy is an international priority.
Foreign Minister Shah Mehmood Qureshi told reporters this week in Islamabad that he was optimistic the international community would come to Pakistan's aid.
|Shah Mehmood Qureshi, the Foreign Minster of Pakistan, is seen at United Nations Headquarters in New York (File)|
"The world is recognizing Pakistan's role to keep the world peaceful and secure and also recognizing the economic challenges and the human price Pakistan has paid to make the world a safer place," said Qureshi. "And the democratic government of Pakistan is projecting Pakistan's case on that platform."
But the country's traditional donors have not stepped-in to help.
Last week, President Asif Zardari returned from China with pledges to help construct two nuclear power plants - but no direct aid. This week, the "Friends of Pakistan" meeting of several wealthy nations including the United States and Saudi Arabia, produced no plans to address the immediate problem of servicing Pakistan's debt.
Former finance minister Zubair Khan says inaction by the current government and the global financial crisis have left Pakistan few options for meeting its estimated $3 billion in upcoming debt payments.
"The worldwide financial crisis has already put strains on potential donor countries. Secondly, Pakistan has not come up with a viable economic program, which they would be ready to support," said Zubair. "I do not think anyone is ready to give just pure cash to Pakistan to do whatever it likes with it."
Zubair says seeking money from the IMF will force Pakistan's government to adopt badly needed financial reforms that should lead to longer-term financial stability.
But officials have been reluctant to apply for politically-unpopular IMF aid because its stringent financial conditions could hurt Pakistanis already reeling from high food and energy prices.
Sartaj Aziz, who served as finance minister under Nawaz Sharif in the 1990s, says an IMF loan could push the rupee even lower against the dollar, drive up unemployment and further raise utility prices. He says if officials can secure enough money from somewhere else to meet upcoming debt payments, Pakistan may be able to stabilize itself in the next year.
He says right now the problem is short term, because if there is the expected bumper food crop this year and oil prices stay low, then next year Pakistan can be out of the crisis.
Sartaj said one of the country's last opportunities to avoid accepting an IMF package appears to be President Zardari's trip to Saudi Arabia scheduled for the first week of November.
Saudi Arabia has already turned down requests to postpone payments for oil imports, casting doubt on the country's willingness to provide immediate aid.
Economists say Pakistan's financial problems have been developing for several years, but the seven-month-old government has done little to address them since taking office.
Now, facing a growing Taliban insurgency along its Afghan border and a gloomy international financial climate, Zubair Khan says the government may have no other choice but to accept the hardships of an IMF loan.
"It was mostly for political reasons that they were trying to avoid going to the IMF, but now the time of reckoning has come and they have to go there," said Zubair Khan.
Pakistani officials are meeting with IMF representatives this week in Dubai. Pakistan's finance ministry said IMF officials were scheduled to meet in Pakistan, but changed the venue because of security concerns.