IMF sees recovery for Pakistan, country eyes bonds

By Martin Dokoupil

DUBAI (Reuters) - Pakistan's economy is showing signs of recovery but risks remain, the International Monetary Fund said on Thursday, and the country said it was readying its first foray onto international debt markets since 2007.

The IMF bailed out Pakistan in 2008 to avert a balance of payments crisis that, allied to budget and political concerns, had undermined investors' faith in a country central to U.S. efforts to confront al Qaeda and settle a volatile region.

The Fund, which was reviewing the country's progress with Pakistani officials in the United Arab Emirates, said discussions would be completed shortly as Pakistan looks to keep funds flowing from its $11.3 billion aid deal.

"While risks to the economic outlook remain, the early signs of recovery in some sectors, declining inflation, and the improved external position are encouraging," the multilateral lender said in a statement.

The outcome of the talks has been flagged by Pakistani Finance Minister Shaukat Tarin, who told Reuters earlier on Thursday that the IMF had expressed concern about Pakistan's security situation and its impact on economic performance.

"They were concerned how the security situation will affect performance of the country," said Tarin, in Dubai for a round of talks with IMF officials.

"Our recovery, our stabilisation programme is pretty robust, I think they are very comfortable with whatever we are doing," he said.

The Pakistani army is waging a massive offensive against Taliban militants strongholds in South Waziristan that has prompted a spate of bloody revenge attacks on urban targets.