UPDATE 2-Pakistan seeks $9 bln IMF bailout to avert crisis
ISLAMABAD Nov 14 (Reuters) - Pakistan has asked the International Monetary Fund for a $9 billion bailout along with help from other lenders to avert a balance of payments crisis, a finance ministry official said on Friday.
Credit ratings agency Standard & Poor's cited Pakistan's tardiness in securing foreign assistance for a decision on Friday to lower its rating on the nation's sovereign debt deeper into junk bond territory.
"We are asking $9 billion from the IMF, they are talking about $7.4 billion. IMF can give us up to $7.6 billion," a finance ministry official told Reuters on condition of anonymity.
Shaukat Tarin, Pakistan's top economic adviser, told Reuters on Thursday that the government would soon deliver a letter of intent to the IMF, paving the way for the world's lender of last resort to release funds rapidly.
Pakistan's 8-month-old civilian government is banking on goodwill towards a country undergoing a transition to democracy after more than 8 years of military rule.
The international community is concerned that an economic meltdown in the nuclear-armed state could play into the hands of al Qaeda and allied Islamist militant groups seeking to destabilise the Muslim nation of 170 million.
Another official told Reuters on Friday that the letter of intent would probably be sent before Monday, when potential donors are due to gather in Abu Dhabi for a "Friends of Pakistan" conference.
The conference of officials is not expected to result in loans being pledged, but it could pave the way for a ministerial meeting later.
Tarin told the Pakistan Senate on Thursday that the country was likely to receive $5-6 billion from the World Bank and other international financial institutions by December, according to the Associated Press of Pakistan.
He told Reuters a loan of $500 million from China could arrive within weeks.
Markets were disappointed when President Asif Ali Zardari and Tarin returned with little to show from a trip to Beijing last month to garner support from one of Pakistan's most steadfast allies.
China, like other potential lenders, is believed to have encouraged Pakistan to seek IMF assistance in order to introduce some discipline to economic management, analysts say.
Pakistani officials have been coy about saying whether a loan was being sought from the IMF due to domestic political considerations, but Tarin told the Senate that the Fund "has agreed to provide (a) facility on our own terms and conditions".
One condition would be that the government stops borrowing from the central bank, he added.
WORSE RISKS THAN ECONOMIC
Pakistan's central bank said on Thursday it had received $200 million from the Islamic Development Bank.
State Bank of Pakistan's foreign currency reserves are barely enough to cover nine weeks of imports.
With the margin for error thinning by the day, S&P cut Pakistan's long term foreign currency sovereign credit rating to CCC from CCC+, putting it eight notches below investment grade.
Unless Pakistan gets the support soon it will default on a international bond set to mature in February. The bond market priced in a potential default for Pakistani debt months ago.
The central bank raised its key interest rate by 200 basis points to 15 percent on Wednesday, going some way to please the IMF.
A finance ministry official said the IMF would like to see Pakistani interest rates above the core inflation rate, currently running at around 18.3 percent.
Several economies have crumbled in the face of first soaring prices for raw materials earlier this year and more recently a deepening global financial crisis.
The IMF has already approved loan programmes for countries including Ukraine, Hungary and Georgia. (Additional reporting by Sahar Ahmed, Writing by Simon Cameron-Moore; editing by David Stamp)
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