Pakistan may seek IMF's help after China refuses

October 19, 2008|By New York Times News Service

ISLAMABAD, Pakistan -

President Asif Ali Zardari returned from China late Friday without a commitment for hard cash needed to shore up Pakistan's crumbling economy, leaving him with the politically unpopular prospect of having to ask the International Monetary Fund for help.

Pakistan was seeking the aid from China, an important ally, as it faces the possibility of defaulting on its current account payments. With the United States and other nations preoccupied with a financial crisis, and Saudi Arabia, another traditional ally, refusing to offer concessions on oil, China was seen as the last port of call before the IMF.

Accepting a rescue package from the IMF would be seen as a humiliating step for Zardari's government, which took office last month. An IMF-backed plan would require the government to cut spending and raise taxes, among other measures, which could hurt the poor, officials said.

The Bush administration is concerned that Pakistan's economic meltdown will provide an opportunity for Islamic militants to capitalize on rising poverty and frustration.

The Pakistanis have not been shy in exploiting the terrorist threat as way of trying to win financial support, a senior IMF official said. But because of the dire global financial situation, and the reluctance of donor nations to provide money without strict economic reforms by Pakistan, the terrorist argument has not been fully persuasive, he said.

"A selling point to us even has been, if the economy really collapses this is going to mean civil strife, and strikes, and put the war on terror in jeopardy," said the official, who declined to be identified because he was not authorized to speak to the news media. "They are saying, 'We are a strategic country, the world needs to come to our aid.' "

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