Financial storm hits US-allied Pakistan

khan200810070112448281.jpgPakistan’s foreign exchange reserves have hit so low that the country can only afford one month of imports and faces possible bankruptcy.

President Asif Ali Zardari told the Wall Street Journal that Pakistan needed a bail out worth $100 billion from the international community to overcome the nation’s economic crisis and to fight terrorism.

The funds will help stop the outflow of capital from the country each time there is a bomb blast and it will build business confidence, Zardari said.

“If I can’t pay my own oil bill, how am I going to increase my police?” Zardari asked. “The oil companies are asking me to pay $135 [per barrel] of oil and at the same time they (US and Western allies) want me to keep the world peaceful and Pakistan peaceful.”

Zardari is expected to ask the international community for a rescue package at a forum to be held in Abu Dhabi next month. The gathering will determine whether the West is willing to bail out Pakistan

Zardari says Pakistan needs a bail out worth $100 billion

Zardari’s comments come after Pakistan rupee has lost more than 27 per cent of its value so far this year and inflation now runs at 25 per cent.

Meanwhile, the US rating company said in a report today that the nation’s long-term foreign-currency rating was cut two levels to CCC+ from B, with a negative outlook, the rating may be lowered further if the government fails to stop the growing external imbalances, the report added.

The economic crisis has already placed the future of the new government in doubt after the transition to a civilian rule. Given the country’s standing as a frontline state in the US-led so-called war on terrorism, the economic crisis has profound consequences, experts say.

Pakistan already faces worsening security as the army clashes with militants in the lawless Tribal Areas on the north-west frontier with Afghanistan.

Pakistanis jostle to buy a sack of wheat flour in Lahore.

Some economists say that the former government left the economy on the brink of ruin without any durable base. They believe the government is engulfed by crises left behind by former military ruler Pervez Musharraf who resigned the presidency in August.

The economic crises come amid Washington’s recent unilateral strikes inside Pakistan which have triggered sovereignty debates within the corridors of the parliament in Islamabad.

More than 2,000 people were killed in Pakistan in 2007 in terrorist attacks that the government blames on militants opposed to its support of the US-led campaign against terrorism.

JR/DT
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