BELARUS NEWS AND ANALYSIS

DATE:

23/10/2008

Pakistan and Belarus seek IMF aid

The Associated Press, Reuters

ISLAMABAD: Pakistan sought help from the International Monetary Fund on Wednesday to avoid a possible economic meltdown brought on by high fuel prices, dwindling foreign investment and soaring violence by militants.

And Belarus has requested IMF credit to uphold stability and economic growth rates, the Belarussian central bank said Wednesday.

Pakistani officials had previously said that turning to the IMF to avoid defaulting on billions of dollars of sovereign debt due in the coming months would be a last resort.

IMF aid often comes with conditions like cutting public spending that can affect programs for the poor, making acceptance of the aid a politically tough choice for governments.

The IMF said Pakistan had requested help "to meet the balance of payments difficulties the country is experiencing." The IMF said that the amount of money sought by Pakistan had yet to be determined and that talks on the loan package would begin in a few days.

Economists in Pakistan say that as much as $5 billion is needed to avoid defaulting on sovereign debt due for repayment next year but that $8 billion more may be needed.

The country has also asked for loans from wealthy nations and multilateral agencies like the World Bank. Analysts say Pakistan will probably get that help also because of its front-line status in the battle against terrorism.

Any default would further undermine local and international confidence in the Pakistani government and the economy at a time of intense fighting against Al Qaeda and Taliban militants near the Afghan border.

High oil prices and dwindling investment from overseas have created a balance of payments crisis that is undermining the Pakistani rupee. Pakistan is also battered by high inflation and chronic power shortages.

The total amount of foreign currency in Pakistani banks has fallen by more than half since last year to $7.75 billion.

Qaiser Bengali, a leading economist in Pakistan, said it had no choice but to ask the IMF for help. He said the IMF should condition any assistance on spending cuts in the military and the civil service - two areas he said were overfinanced - and protect programs that help the economy.

"We are like a factory that spends more than its revenues on the head office and on security guards and there is no money left for spare parts and raw materials," Bengali, said.

"That kind of factory is certain to shut down."

The central bank of Belarus confirmed its request to the IMF a day after the Russian finance minister said Moscow would issue a $2 billion loan to Belarus while resuming negotiations on a proposed common currency.

"We confirm that we have approached the International Monetary Fund to provide credit to support financial stability, create a cushion of security and to maintain growth rates in the economy," said Mikhail Zhuravovich, a spokesman for the Belarussian central bank. "The amount of the credit depends on the IMF."

The bank's chief spokesman, Anatoly Drozdov, described the request as a "precautionary measure."

Source:

http://www.iht.com/articles/2008/10/22/business/fund.php

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