Pakistan's 'Plan C' -- Wall Street Journal
Does the IMF have no fresh ideas?
It's been a decade since the International Monetary Fund preached its damaging elixir of currency devaluation and tax hikes to Asian nations in financial crisis. As Pakistan's economy teeters, the IMF is once again on the scene with familiar policy prescriptions. This is no time to recycle past mistakes.
Like Ukraine and Iceland, Pakistan is in a balance-of-payments crisis. The country imports large quantities of food and fuel and pays for it in U.S. dollars. As the price of these commodities rose over the last year -- thanks to the U.S. Federal Reserve's easy money policies -- Pakistan spent down its foreign exchange reserves, as the nearby chart shows. Government officials estimate Pakistan needs $3 billion to $4 billion to cover its foreign-currency debt obligations over the next month alone. Islamabad could ask for as much as $15 billion from donors.
Pakistan's new government could have mitigated this pressure earlier this year had it moved quickly to stabilize the country's security situation and court foreign investment. Instead, Asif Ali Zardari's ruling People's Power Party focused on domestic political battles, such as the reinstatement of judges fired under former President Pervez Musharraf. Domestic terrorism re-emerged in major cities, investors fled and the local currency, the rupee, fell 25% in value, fueling inflation and making imported fuel and food relatively more expensive.
Read more ....
My Comment: Pakistan is in the midst of fighting a civil war .... I cannot see how the IMF can be used in such an environment.