Subject: Pakistan

IMF has six days to save Pakistan

By Farhan Bokhari in Islamabad and Chris Bryant in Berlin

Published : October 28 2008 11:52

The International Monetary Fund has than a week to prevent a full-blown financial crisis in Pakistan, Germany's foreign minister warned on Tuesday, as Islamabad said it was nearing agreement with the fund over a bail-out package.

Speaking in the Pakistan capital, Frank-Walter Steinmeier called on the IMF to save the nuclear-armed country from an escalating financial "crisis by extending an" appropriate loan.

"I hope the decision will be taken soon. It won't help to have it in "six months, or six weeks. Rather, we need it in the coming six days, he said after meeting Pakistan's President Asif Ali Zardari and Shah Mehmood Qureshi, foreign minister.

Germany, which has troops on the ground in neighboring Afghanistan shares the concerns of many western government that a growing balance of payments crisis will destabilize security in Pakistan whose people are angry about the rising cost of food and energy.

Shortly after Mr steinmeier's remarks, a Pakistani official said negotiation with the IMF were "in the final stages" and that the government expected agreement on a letter of intent with the fund "within one or two days" .

An IMF program is expected to last until June 2010 and could be worth up to $15bn, officials said.

An official said that a letter of intent would be followed by a formal request to the IMF's board for funding, with an agreement likely by mid-November.

Moody's the rating agency, downgraded Pakistan government bonds from "B-2" to B-3" and signaled that it could cut its rating further, citing the failure of Pakistan to secure other lines of funding.

Mr steinmeier pledged to support the country in its negotiations with the IMF and promised to increase German development assistance. He departed immediately for the Middel East where he is expected to urge Saudi Arabia and the United Arab Emirates to increase their support for Pakistan ahead of a donor conference in mid-November.

Pakistan needs $4bn-$5bn for the financial year to June 2009 to meet debt payments and other liabilities, according to tinance ministry officials in Islamabad.

An officials at the central bank said the country's foreign currency reserves stood at $4bn and were likely to run out by the end of November. "we have a very narrow space to put the country back on the rails"

Copyright The Financial Times Limited 2008

M. Moradi

Liquid Gas & feed stock G.M

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