Pakistan does not need loan: IMF official

By Koh Gui Qing

KARACHI (Reuters) - Pakistan does not need to turn to the International Monetary Fund (IMF) for money in the next 10 months if the government cuts spending and gets other sources of funding to offset falling reserves, a senior IMF official said.

Mohsin Khan, IMF's director for the Middle East and Central Asia, said Pakistan had not asked the IMF for loans.

He said Pakistan would not need an IMF loan in the fiscal year to June if the government abolishes all fuel subsidies by December as planned, and stops borrowing from the central bank to pay for its budget deficit.

High oil prices have depleted Pakistan's foreign exchange reserves to levels worth less than three months of imports, sparking alarm among investors that Pakistan may need to take up loans from the IMF to pay for imports.

Khan said the government needs to stick to its privatisation plans to raise money, secure over $1 billion worth of loans from the World Bank and the Asian Development Bank, and get Saudi Arabia to defer an estimated $5.9 billion worth of oil payments.

"If things fall right for them in all these things that they are planning to do, I don't believe there will be any need for them to come to the IMF," Khan, who was in Pakistan this week, said in a phone interview.

"Unless there is a total collapse of foreign direct investments, they can ride this out," he said.

Pakistan, a repeat customer of the IMF, last took an IMF loan worth $1.3 billion in 2001 to help fight poverty and offset the effects of a regional war on the economy. Backing for the loan was helped by Pakistan's support for the U.S. war on terrorism.