Pakistan should consider seeking an emergency support package from the International Monetary Fund, a senior IMF official said on Monday ahead of talks on Pakistan's restructuring plan. Mohsin Khan, director of the Middle East and Central Asia department at the IMF, said Pakistan has not made a formal request to the IMF for emergency funds but that options were running out.
"Market borrowing is not an option, not in the current markets," Khan told Reuters in an interview. Officials from the IMF and Pakistan will meet on Tuesday in Dubai to discuss details of the country's financial restructuring plan, which does not include IMF funding at this stage, Khan said.
Pakistan is rapidly losing foreign currency reserves, and analysts say it needs up to $3-4 billion urgently to stabilise the economy, although the total financing gap for the balance of payments was projected at around $7 billion for the fiscal year ending June 30, 2009.
Khan estimated that Pakistan had unmet funding needs of around $4 billion. "Where that money is going to come from is anybody's guess," he said. Many wealthy donor nations are embroiled with their own financial crises, leaving few options for Pakistan, he said, other than some of the energy exporting nations in the Gulf and multilateral organisations like the IMF.
"There has been no formal approach to the IMF," Khan said ahead of the meeting. "Would I encourage them to? The answer is yes." The IMF would be able to provide funding to Pakistan on favourable conditions with around 5-6 percent interest, Khan said, adding the most painful part of restructuring requirements - the abolition of petrol subsidies - had already been done. "Were they to make a formal request, we can move really fast," he said.