Pakistan asks for emergency IMF funds to stave off bankruptcy
Hit by the global financial crisis, Pakistan is the second country after Iceland to ask the International Monetary Fund for help against its looming balance of payments crisis. With a population of 170 million, Pakistan is also the biggest nation and the first Muslim country to turn to the IMF, troubled equally by near bankruptcy and an encroaching al Qaeda-backed Taliban insurgency.
The IMF directors in Washington are expected to approve a $4-5 bn a first aid rescue package against outflow of cash as investors clean out their accounts in Pakistani banks. The level of cash reserves barely covers one month’s imports, inflation hovers at a 30-year high and the value of the rupee is in freefall, making food and other staples unaffordable. The new president Ali Asif Zardari is trying to raise at least $10 bn from western bankers to stave off bankruptcy within weeks from a group called Friends of Pakistan.
The Pakistani army is engaged in ferocious battles to contain the thrust from al Qaeda and Taliban from the northern and western provinces bordering on Afghanistan to the country’s heartland. They are threatening not only to destabilize the regime but also its nuclear arsenal. Pakistan has 60-80 nuclear warheads. Bankruptcy would make it impossible for the Pakistani army to sustain its counter-insurgency and counter-terror operations. Economic deprivation would cut deep into public support for these operations.
debkafile‘s counter-terror sources report that Pakistan’s woes are such that the United States, itself beset by economic troubles, is up against the need to provide instant succor for this vast Muslim nation at the forefront of the war on terror, a need as critical as the rescuing an American bank.