Page last updated at 16:25 GMT, Tuesday, 28 October 2008

Pakistan 'needs IMF loans soon'

Pakistani Foreign Minister Shah Mehmood Qureshi (L) with his German counterpart Frank-Walter Steinmeier

The German Foreign Minister, Frank-Walter Steinmeier, has said that Pakistan has just "a few days" to raise billions of dollars in foreign loans.

After meeting senior members of the government, he said that Pakistan had no choice but to seek a loan from the International Monetary Fund (IMF).

Mr Steinmeier said that the loan was needed to avoid a deepening crisis.

Economists say that the country needs up to $15bn over the next 24 months to stabilise the economy.

They say that can best be achieved by sustained foreign assistance and investment in the agricultural, industrial and energy sectors.

Pakistani soldier
The army says that it too is willing to trim expenditure

Meanwhile the Pakistani army has said it has halted the construction of a new multi-million dollar headquarters in Islamabad because of the economic turmoil.

A military spokesman said that army chief, Gen Ashfaq Kiyani, has decided to suspend construction of a $210 million new headquarters which would have housed all three military services.

Correspondents say that even before the economic crisis set in, critics had derided it as a waste of money.

"About 10 percent of work has been completed but we felt it should be halted as we understand the nation's quest for economic stability and want to help," the spokesman told the Reuters news agency.

Correspondents say that work on the headquarters began last year on a plot of land in the foothills of the Himalayas.

Little assistance

Mr Steinmeier said that an IMF loan was necessary so that Pakistan could avoid "the most difficult situation".

"I hope the decision (with the IMF) will be taken soon. It won't help to have it in six months, or six weeks. Rather, we need it in the coming six days," Mr Steinmeier said at a joint news conference conference with his Pakistani counterpart, Shah Mehmood Qureshi.

Scavenger girls in Pakistan
Some economists fear that Pakistan faces economic meltdown

"We will support your country in the negotiations with the IMF," he said.

The German foreign minister said Germany - as Europe's biggest economy - was willing along with other countries to discuss a separate package of assistance for Pakistan to boost faltering economic growth.

"That is the only way to stabilise the situation," Mr Steinmeier said.

Correspondents say that Pakistan's seven-month-old government has been reluctant to go to the IMF and has been looking for help from friendly governments - but so far little assistance has materialised.

The BBC's M Ilyas Khan says that the country has plenty of long-term commitments from a group of countries called the Friends of Pakistan, but any default on international obligations in the short term may hurt its ability to attract future investment.

Our correspondent says that the decision by two of its closest allies, China and Saudi Arabia, to decline providing cash for an immediate bailout means that only one short-term window remains open, that of the IMF, with its strategy of achieving stabilisation by cutting growth.

With donors pre-occupied with their own financial problems because of the worldwide financial crisis, experts say that many countries would apparently prefer to wait for IMF involvement before they lend Pakistan money, because that would make the country more financially disciplined.

Pakistan has said that it has not yet formally asked the IMF for a loan, but an IMF spokesman said on Friday talks going on in Dubai between the fund and Pakistani officials would enable the IMF to respond swiftly should a request be made.

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