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Pakistan says it needs billions in aid to avert financial crisis

October 21, 2008

ISLAMABAD (Reuters) : Pakistan requires $10 billion to $15 billion of support from foreign lenders to avert a balance of payments crisis, a government adviser said Tuesday.

“In 24 months, we must correct the imbalance we have created,” Shaukat Tarin, economic adviser to the prime minister, told Dawn News television.

Islamabad, with its the central bank holding barely enough foreign currency to cover six weeks of imports, was expected to seek a multibillion-dollar rescue package from the International Monetary Fund at a meeting in Dubai later Tuesday. Other donors are expected to help if the IMF paves the way and approves Pakistan’s economic strategy.

The border gates between India and Pakistan. (Amit Gupta/Reuters)

Pakistan has already approached the World Bank, the Asian Development Bank and other possible donors, including Saudi Arabia and China, for support.

Inflation in Pakistan is running at close to 25 percent, and the budget deficit is unsustainable, while government borrowing from the central bank has squeezed liquidity in the banking system and the international bond market has priced in a debt default.

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