Pakistan to ask IMF if country gets no other help

ISLAMABAD — Pakistan will ask the International Monetary Fund for a bailout package in less than two weeks if it can not secure other funding, the official in charge of the effort to stabilize the crisis-wracked country said Tuesday.

But an IMF program would be politically unpopular in Pakistan because it likely would come with painful conditions to cut government spending that could affect programs for the poor.

In talks with a British envoy on Tuesday, Pakistani President Asif Ali Zardari "underlined the government could ill afford financial assistance from the IMF with tough conditions," the Pakistani Foreign Ministry said in a statement.

Zardari noted that Pakistan's "very heavy price" in the war on terror should be acknowledged by the international community.

Without help, nuclear-armed Pakistan faces the prospect of a run on its currency and defaulting on its international loans, shocks likely to fuel unemployment and inflation and puncture support for its pro-Western government.

Pakistan already has approached the IMF to help solve its balance of payments crisis. But it hopes the World Bank and allies such as the United States, Saudi Arabia and China and others in grouping called the "Friends of Pakistan" to provide about $5 billion — and avoid an IMF austerity program.

"If I do not get a comfortable indication (from the 'Friends') by Nov. 10, there is no other option but to go to the IMF," Shaukat Tareen, Pakistan's recently appointed economic troubleshooter, told The Associated Press late Tuesday.

"I have already pointed out that we have to hurry to secure assistance to avoid the monetary fund."

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 sovereign debt.

That would severely dent confidence in the country and undermine already slowing economic growth. The country already faces 25 percent inflation and chronic power outages.

Through much of its history, Pakistan has struggled with chronic economic instability and foreign debt, but the current crisis comes at an especially dangerous time.

Militants sheltering along the border region with Afghanistan are blamed for the rising violence in that county as well as a string of bloody attacks at home. Osama bin Laden and other top al-Qaida leaders are thought to be hiding in the frontier region.

Tareen's comments came hours after German Foreign Minister Frank-Walter Steinmeier said Pakistan needed to secure money from the IMF within six days to avoid "the most difficult situation in Pakistan."

Steinmeier said European governments would press the IMF to quickly grant assistance to a country on which the West depends in its efforts to stabilize Afghanistan.

"We understand of importance of Pakistan in this region for security and stability. That is why we are here," Steinmeier said at a news conference with his Pakistani counterpart.

Asked about Steinmeier's remark that country had less than a week to go to the IMF, Tareen said: "He is saying six days, and I am saying 12 days. What important is that we need quick assistance."

Pakistan's government insists it already has taken action to slash unsustainable subsidies on food and fuel — measuring that hurt in a country where about three-quarters of the population live on no more than $2 a day.

There is speculation that an IMF loan might come with demands to slash the government's own budget, including defense spending, and raise taxes, for instance on wealthy landowners who currently pay little.

In a sign of the times, the lavishly funded 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."

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Associated Press Writer Stephen Graham contributed to this report.

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