Dollar

$15 Billion Imf Package To Help Struggling Economy

24 October 2008

THE International Monetary Fund has flagged a multibillion dollar bail-out plan for Pakistan to save it from bankruptcy.

The fund's chief, Dominique Strauss-Kahn, said it would begin discussions with Pakistani authorities in the next few days about a program to restore confidence in the country's crumbling financial system. Political uncertainty and grave security problems have contributed to an economic crisis in the country.

During the past year growth has slowed, inflation has surged and investor confidence has collapsed, causing a slump in the share market. The country's foreign exchange reserves have plunged, as has its its exchange rate.

The country's foreign currency reserves are reported to have slipped to just $US4.5 billion ($6.7 billion), and it is feared the country may be unable to service the interest payments on its 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," Mr Strauss-Kahn said.

His announcement followed crisis talks between IMF and Pakistani authorities in Dubai earlier this week.

One of the main functions of the Washington-based IMF is lending to countries with balance of payments difficulties. But economic policies to correct underlying economic problems are often made a condition of financial support.

It is understood an assistance package worth between $US10 billion and $US15 billion is being considered.

The Government has already slashed fuel subsidies and lifted electricity and gas prices this year. It has also proposed big cuts in spending.

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