Pakistan is seeking emergency IMF loan

Pakistan has agreed to borrow $7.6 billion from the International Monetary Fund in an effort to stabilize the economy of this strategically important U.S. ally on the front lines of the battle against Al Qaeda and the Taliban.

The government had been reluctant to go to the IMF but had little choice once even its close allies -- the United States, China and Saudi Arabia -- snubbed its pleas for significant bilateral aid.

Pakistan’s finance chief said Saturday that the IMF agreed to the bailout after endorsing plans to tackle the country’s huge budget and trade deficits.

Opposition lawmakers fear that the IMF will impose austerity measures that will hurt ordinary Pakistanis, two-thirds of whom live on $2 or less a day. But the IMF said the package included steps to protect the poor from cutbacks.

The loan will boost Pakistan’s foreign currency reserves, which have seen a rapid decline that raised the prospect of a run on the local currency and a default on the country’s foreign debt.

“We have fulfilled our commitment that Pakistan will never default” on its debt, Shaukat Tarin, finance advisor to Pakistan’s prime minister, said at a news conference.

Tarin said Pakistan would apply formally for the emergency loan this week, and an IMF statement said its board would consider it shortly.

Pakistan is one of a number of countries seeking IMF assistance as a result of the global credit crunch. However, its strategic importance in the battle against terrorism makes its financial and political stability particularly crucial.

Security concerns are currently focused on Peshawar, a strategically vital city where militants stage attacks on U.S. and North Atlantic Treaty Organization troops across the border in Afghanistan and are threatening the city itself.

On Saturday, officials said militants fired a mortar shell into the village of Michni, north of Peshawar, killing one soldier and wounding another, and police killed a suspected suicide bomber by firing a rocket at his explosives-filled car in the nearby Shabqadar area.