UPDATE 1-Pakistan's forex reserves fall to $11.512 bln

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KARACHI, May 29 (Reuters) - Pakistan's foreign reserves fell by $373 million to $11.512 billion in the week that ended on May 24, the central bank said on Thursday.

Reserves held by the State Bank of Pakistan fell to $9.061 billion from $9.5 billion a week earlier, while those held by commercial banks rose to $2.451 billion from $2.385 billion.

Pakistan's foreign exchange reserves hit an all-time high of $16.486 billion on Oct. 31, 2007, but have fallen since then because of political uncertainty, beginning when President Pervez Musharraf imposed six weeks of emergency rule on Nov. 3.

Foreign investors remained cautious after the assassination of former prime minister Benazir Bhutto on Dec. 27.

While February elections were generally smooth, cracks have appeared in the coalition that emerged while confrontation between the government and Musharraf looms.

The central bank last week increased in its key discount rate to 12.0 percent from 10.5 percent, to counter accelerating inflation and widening fiscal and current account deficits.

Central bank Governor Shamshad Akhtar said this month foreign inflows of up to $3.5 billion were expected in the short- to medium-term, most of it in the form of loans from multilateral lenders and friendly governments. (Reporting by Sahar Ahmed)