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Rediff.com  » Business » Pak seeks $10 bn bailout from US, UK to avoid bankruptcy

Pak seeks $10 bn bailout from US, UK to avoid bankruptcy

Last updated on: October 10, 2008 17:54 IST

Facing imminent bankruptcy, terror-stricken Pakistan has dispatched its top finance officials to Washington, London and other friendly world capitals seeking a lifeline of over $10 billion in emergency aid.

The mission to secure a six billion pound ($10.18 billion) bailout package is led by Shaukat Tareen, Pakistan Prime Minister's Finance Adviser and Shamshad Akhtar, the Governor of Pakistan's central bank, Daily Telegraph reported.

The Pakistani delegation is seeking an American and British-backed lifeline to tide over the current crisis.

Oil-rich Gulf states have also been tapped to match Western funds with extra billions to ensure that Pakistan, which until recently touted itself as the 'next Asian Tiger', avoids a balance of payments crisis, the report said.

Tareen, a suave former banker, was appointed this week to spearhead the last ditch bid to avert the possible bankruptcy after it was revealed that state reserves had halved since democratic elections were held in March this year and a coalition government led by the Pakistan People's Party was formed.

"Tareen has given himself four weeks to salvage the economy. High oil prices have combined with endemic corruption and mismanagement to push Pakistan to the brink of bankruptcy," the report said.

Pakistan's middle class shifted massive amounts of capital overseas as a crisis of confidence in Pakistan's long term future took hold following the assassination of former Prime Minister Benazir Bhutto last December, it said, analysing the cause for the latest crisis facing the nation.

Facing imminent bankruptcy, terror-stricken Pakistan has dispatched its top finance officials to Washington, London and other friendly world capitals seeking a lifeline of over $10 billion in emergency aid.

The mission to secure a six billion pound ($10.18 billion) bailout package is led by Shaukat Tareen, Pakistan Prime Minister's Finance Adviser and Shamshad Akhtar, the Governor of Pakistan's central bank, Daily Telegraph reported.

The Pakistani delegation is seeking an American and British-backed lifeline to tide over the current crisis.

Oil-rich Gulf states have also been tapped to match Western funds with extra billions to ensure that Pakistan, which until recently touted itself as the 'next Asian Tiger', avoids a balance of payments crisis, the report said.

Tareen, a suave former banker, was appointed this week to spearhead the last ditch bid to avert the possible bankruptcy after it was revealed that state reserves had halved since democratic elections were held in March this year and a coalition government led by the Pakistan People's Party was formed.

"Tareen has given himself four weeks to salvage the economy. High oil prices have combined with endemic corruption and mismanagement to push Pakistan to the brink of bankruptcy," the report said.

Pakistan's middle class shifted massive amounts of capital overseas as a crisis of confidence in Pakistan's long term future took hold following the assassination of former Prime Minister Benazir Bhutto last December, it said, analysing the cause for the latest crisis facing the nation.

A leading Pakistani private banker in Dubai, who has acted as handmaiden to the exodus, said the collapse and replacement of former President Pervez Musharraf's regime had amounted to a devastating double blow.

"Capital flight has got to be stopped if the country is to be turned around," he said. "But people take their cues from the leaders. The looters are back in charge and if they won't repatriate their money from Swiss bank accounts why should we keep our money in Pakistan?"

While Pakistan's economy has repeatedly been on the brink since independence in 1947, the stakes have never been higher, the report noted.

Pakistan's new President Asif Ali Zardari, Bhutto's widower, had hoped to raise a cash infusion at a 'friendly states' summit in the United Arab Emirates next month. But the economy has unravelled too quickly to wait, the report said.

"We have been here in the past but now Pakistan urgently needs balance of payments support," said the treasurer of a leading international bank in Karachi.

"We need some action this month."

Saudi Arabia and the conservative Arab monarchs have signalled their willingness to divert part of their sovereign wealth funds to shore up Pakistan. Gulf support will come at a price with the Emirates determined to ensure its own food security by buying up huge tracts of Sindh and Punjab provinces.

Islamabad will be expected to grant blanket exemptions on exports from its farms to the Gulf in returnĀ  an unpopular move when 25 per cent inflation has forced the poor to assemble in huge crowds for government subsidised wheat.

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