UPDATE 3-Pakistan banks on other lenders saving it before IMF
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By Augustine Anthony
ISLAMABAD, Oct 18 (Reuters) - Pakistan might need to borrow from the International Monetary Fund if other multi-lateral lenders and friendly governments fail to help out in the next few weeks, the country's new troubleshooter said on Saturday.
A balance of payments crisis is expected to climax soon, but there was no danger of Pakistan defaulting on its international debt obligations, Shaukat Tarin said a day after returning from overseas visits to Washington and Beijing to drum up support.
"I am very confident that I have plans to make sure, whatever it takes, that we should build our reserves and that we do not default," said Tarin, appointed last week as adviser to the prime minister on economic affairs.
"Now, there is no danger," he told journalists after a news conference, but he said lenders were running out of time to come to Pakistan's rescue.
"We think we will be in very good shape ... within the next 30 to 60 days," Tarin said of the prospects of sewing up funds to cover a balance of payments financing gap that the IMF estimates at up to $4.5 billion, and Pakistan reckons at $3.0 billion for the fiscal year ending on June 30 next year.
Another independent adviser to the government has said up to $4 billion is urgently needed to stabilise Pakistan's economy.
Tarin attended the annual IMF meeting in Washington before joining President Asif Ali Zardari in China earlier this week.
Tarin said he expected multilateral lenders -- the World Bank and Asian Development Bank -- to front-load disbursements from development assistance programmes.
The Islamic Development Bank and Britain's Department for International Development were also expected to virtually double their planned assistance, he said.
There was also a plan to securitise workers' remittances from overseas to the tune of $1.5-2.0 billion, he said.
PLAN C
If all else failed, Tarin said the government had "Plan C" in place. "If we want to go to the IMF, we can ... but only as a backup," he said.
The international bond market has priced in a Pakistani default on a $500 million bond maturing in February.
But analysts expect the international community to rally round the nuclear-armed Muslim nation, whose support is crucial to the NATO mission in Afghanistan and the defeat of al Qaeda.
Potential donors, including China, are expected to gather in Abu Dhabi in November, under the banner "Friends of Pakistan".
Foreign Minister Shah Mehmood Qureshi told the news conference that Chinese bankers were coming to assess Pakistan's needs, and Chinese firms would invest $1 billion by June 2009.
Pakistan has also asked oil suppliers in the Gulf to accept deferred payments.
Pakistan's stock market has been moribund since late August, when authorities imposed a floor that blocked investors from exiting a market that has dropped 35 percent this year.
Pakistan's rupee hit a record low of 84.40 to the dollar on Friday, and as of Saturday had lost 25 percent so far this year.
Tarin said the rupee had been overvalued previously, and that was being remedied by a more flexible exchange rate policy.
Analysts say Pakistan has had little option other than to let the rupee weaken as its currency reserves are dwindling.
Data released on Thursday showed total reserves were equivalent to around two months import cover, while the portion held by the central bank represented barely six weeks cover.
Bringing down inflation, running at around 25 percent, was a priority. Monetary tightening and fiscal discipline were needed.
A day earlier the central bank announced aggressive steps to boost liquidity in the banking system by cutting banks reserve requirements, in order to ease a liquidity crunch. (Additional reporting by Sahar Ahmed; Writing by Simon Cameron-Moore; Editing by Elizabeth Piper)
