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By Michael Georgy
ISLAMABAD, March 6 Pakistan has reached a
critical balance of payments situation and will need another
package from the International Monetary Fund before the end of
the year to avert a crisis, one of the biggest lenders to the
country said on Wednesday.
The Asian Development Bank's country director, Werner
Liepach, also told Reuters in an interview Pakistan will need up
to $9 billion from the IMF to shield the economy.
Pakistan currently has enough hard currency to cover only
about two months of imports. Asked if the country, a key U.S.
ally, was in a balance of payments crisis, Liepach said:
"It depends how you define a crisis. Maybe we are already in
A fragile economy is just one of Pakistan's myriad problems
as it heads into an election expected in May. The government is
facing a stubborn Taliban insurgency and a worsening sectarian
conflict in which hundreds have been killed in recent months.
In 2008, Pakistan averted a balance of payments problem by
securing an $11 billion IMF loan package, but the IMF suspended
the programme in 2011 after economic and reform targets
including widening the country's miniscule tax base were missed.
Some analysts have since warned about the prospect of a new
balance of payments crisis.
Asked if Pakistan could avoid going back to the IMF, Liepach
said: "I don't see that happening. It's a question of time. They
need to do this before the end of this calendar year."
"It needs to be $6 billion to $9 billion."
So far, remittances from Pakistanis working overseas of
about $1 billion a month have helped keep Pakistan afloat, but
by a thin margin.
"We are now at less then three months of imports. The
current outlook is for a further decline in foreign exchange
reserves," said Liepach.
The ADB, along with the IMF, has been encouraging Pakistan's
unpopular government to carry out politically-sensitive reforms
to strengthen the economy and widen the country's revenue base.
There is little chance of that happening anytime soon as the
ruling Pakistan People's Party and its coalition partners gear
up for the national election.
Past decisions to raise fuel prices, for instance, have
triggered street protests, prompting the PPP's allies to leave
the governing coalition and handing political ammunition to
Pakistan's highly vocal opposition parties.
But the IMF has said it will not consider rescheduling
repayments of the $6.2 billion Pakistan still owes without a
comprehensive plan for reform agreed on by all political
"There are many payments that need to be made to
international organisations, most importantly the IMF. There is
a big chunk in payments to be done over the next two years that
is not matched by inflows," Liepach said.
The Pakistani rupee has eased 0.8 percent against the dollar
so far this year after losing 7.6 percent in 2012. Last year's
slide is more severe than the fall of the Indonesian rupiah,
which was the worst performing currency among the top traded
regional units, according to Thomson Reuters data.
On Dec. 1, it hit a record low of 98.24 to the greenback.
"The saving grace at this moment in time is the relatively
high remittances that continue to come. About a billion dollars
plus a month," said Liepach.
"That provides some cushion but that is not something that
is resolving or addressing the issue at heart."
(Reporting by Michael Georgy; Editing by Sanjeev Miglani)