“The adviser to the prime minister said that the discussions – which were merely dicussions – were held under Article IV of IMF rules, because the country would need an injection of $4bn in the next few years.”
Hyder said Tarin outlined a series of plans.
“Plan A was to include the World Bank, the IMF, the Asian Development Bank and the Islamic Bank to cough up money to meet the country’s requirements.
“Plan B would happen in mid-November, where friends of Pakistan would meet in Abu Dhabi, to work out ways to help steer the country out of economic collapse
“And Plan C would be the bitter pill to swallow, the IMF.”
Pakistan’s foreign currency reserves have been falling at a rate of nearly $1bn a month, and the central bank has barely enough to cover six weeks of imports.
Total reserves, including those held by commercial banks, stood at $7.75bn on October 11, of which the central bank’s reserves accounted for $4.34bn.
|IMF may give funds to Pakistan as emergency financing [AFP]|
Pakistan needs $10bn to $15bn of support from foreign lenders to cover its current account financing gap and undertake economic adjustments over the next two years, the country’s newly appointed economic trouble, Tarin said.
Inflation in Pakistan is running at close to 25 per cent, the budget deficit is unsustainable, government borrowing from the central bank has squeezed liquidity in the banking system and international bond prices have priced in the risk of a debt default.
Hyder said: “The big pressure is on poor and middle class, with energy deficiencies, supply problems and the issue of water – there have been some disputes with India over water that was meant to be used by Pakistan.
“But so far people have been able to hold together; to stick together and endure the storm that is blowing across this country – in security, socially, stratgically – there are all sorts of challenges.”
Dominique Strauss-Kahn, the IMF’s managing director, said financing could be made within the framework of the fund’s emergency financing mechanism, while a senior Pakistani government official said it would be a stand-by agreement which would run for two years, though the amount had yet to be settled.
Pakistan’s sovereign bonds due in 2016 fell to 45 cents to $1 on Thursday from a previous bid of 39 cents, reflecting some scepticism about how successful IMF assistance might be.
Hyder said: “Most people have speculated that talks with the IMF were an absolute necessity and that it is urgent that talks are under way because the other plans may fail.
“Let us not forget that there is a global financial crisis,” Al Jazeera’s correspondent said. “With jitters thoughout Asia, so many countries would be wary of lending out money when their own economy is in the doldrums.
“Another big question will be, will the project for the crop and wheat production meet the Pakistan’s output requirements, because if it is not good enough, there will be further problems.”
The Pakistani rupee was quoted at 81.40 per dollar as markets opened on Thursday, modestly weaker than 81.30 at Wednesday’s close.
The main Karachi stock market index was flat at 9,183.74 points. The index has fallen almost 35 per cent this year.