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Germany says Pakistan needs IMF loan within week

Germany says Pakistan needs IMF loan within week

Pakistan must secure a loan from the International Monetary Fund within a week to avert a financial crisis, Germany's foreign minister said Tuesday.
Pakistan faces a dangerous cocktail of economic problems and rising violence that raise doubts about the nuclear-armed nation's stability and ability to keep helping the West fight terrorism.
While Pakistan has already approached the IMF to help solve its balance of payments crisis, it has held out hope that it can raise about $5 billion from other lenders _ avoiding an IMF austerity program.
But German Foreign Minister Frank-Walter Steinmeier said after talks with Pakistani officials in Islamabad on Tuesday that Pakistan's problems were so urgent that it had no choice but to formally seek an IMF loan.
"I can only hope that the decision is taken quickly, because a loan in six months or six weeks will not help, but only if it is approved within the next six days," Steinmeier said at a news conference with his Pakistani counterpart. "Then one can perhaps avoid the most difficult situation in Pakistan."
He said Germany, Europe's biggest economy, and other countries were discussing a separate package of assistance for Pakistan to boost faltering economic growth.
"That is the only way to stabilize the situation," Steinmeier said.
Pakistani Foreign Minister Shah Mehmood Qureshi said Steinmeier had been "very supportive" of Pakistan in talks with its foreign backers. He didn't mention the IMF.
High oil prices and dwindling overseas investment have left Pakistan with a yawning balance of payments deficit. The gap is draining its foreign currency reserves and pushing it toward a default on its international debt.
Without help, it faces the prospect of a run on its currency and defaulting on its international debt, developments that would wreck already shaken confidence in the country.
For ordinary Pakistanis, that could add unemployment and falling real incomes to problems that already include chronic power outages and 25 percent inflation and spark popular unrest.
Pakistani officials had hoped to persuade allies such as the United States and Saudi Arabia as well as institutions including the World Bank to provide soft loans or accelerate already pledged development aid.
But with many governments preoccupied with the global banking crisis, Pakistan has received no firm public commitments of assistance.
An IMF program would be politically unpopular in Pakistan because it will likely come with tough conditions.
The government insists it has already taken action to slash unsustainable subsidies on food and fuel _ measures that hurt in a country where about three-quarters of the population live on no more than $2 dollars a day.
There is speculation that an IMF loan might come with demands to slash the government's budget, including defense spending.
In a sign of the times, the army on Tuesday halted work on a new general headquarters in the capital, saying it "shares the nation's quest for economic stability through a spirit of sacrifice."
Instead of bailing Pakistan out with cash, Steinmeier said Germany and other nations in a 'Friends of Pakistan' group established in September might set up a fund to support economic development in the South Asian country.
He said the group would meet in mid-November in Abu Dhabi.
Steinmeier also called for closer coordination of international efforts to pacify Pakistan's tribal areas, where Talliban and al-Qaida militants have found refuge.
Pakistan's parliament last week passed a resolution declaring that dialogue and development would be the main planks of its policy to counter terrorism and extremism. Force, it said, would be the last resort.
Steinmeier said a balance must be struck between security measures and economic development.
"I have the impression from these talks that the Pakistani government is on the right path," he said.


Updated : 2020-12-04 09:41 GMT+08:00