Pakistan Says Monetary Fund Help a Possibility

Pakistan may have to accept politically unpopular International Monetary Fund assistance to ward off a possible economic meltdown if wealthy nations turn it down, the government said Sunday.

Pakistani women rally against inflation in Lahore, Pakistan on Friday, Oct 17, 2008. Pakistan's new...

Pakistani women rally against inflation in Lahore, Pakistan on Friday, Oct 17, 2008. Pakistan's new leaders are scrambling for foreign cash to ward off a possible economic meltdown just as they try to contain soaring Islamist violence. (AP Photo/K.M.Chaudary)

(AP)

Battered by high inflation and a plunging currency, nuclear-armed Pakistan needs up to $5 billion to avoid defaulting on sovereign debt due for repayment next year.

Foreign Minister Shah Mehmood Qureshi said Sunday the "IMF was an option" but no decision had been taken yet.

The crisis comes as the country's new civilian leaders struggle to battle Islamist militants in the northwest blamed for soaring violence at home and in neighboring Afghanistan.

Shaukat Tareen, the finance official leading the country's efforts to secure the money it needs, said he was confident it would not default. He predicted the country would soon receive more than the $4.5 billion through the acceleration of planned development loans and direct assistance from rich countries.

But he said the International Monetary Fund may be needed as a "plan C."

"We can go to the fund if we want, but only as a backup," he told reporters Saturday.

Seeking help from the IMF would be politically difficult for the government because it is often conditioned on deep cuts in public spending that can affect programs for the poor.

President Asif Ali Zardari returned Friday from wealthy China with no public commitment of help.

Pakistan hopes its front-line status in the war on terror will mean the international community will not have the stomach to see it default. But its plea for help comes as many nations are distracted with the global economic crisis.

"Countries are busy with their own housekeeping, but they will not leave Pakistan in the middle of the road," said Muzammil Aslam, chief economist at the Pakistani security firm KASB. "It is the world's first line of defense against Taliban and al-Qaida."

Others economists are not so sure and predicted IMF funds will be needed. 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.