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Pakistan plans new package to revive ailing economy

Pakistan is drafting tough reforms to shore up its crumbling economy and raise the $ 4.5 billion needed to cover its balance of payments deficit, a high-ranking government official said in Islamabad.

Pakistan's economy of this South Asia nation of 130 million people is burdened with $ 32 billion in foreign debt, a desperate shortage of foreign currency and by international economic sanctions imposed after it tested a series of nuclear devices in May.

A six-member team from the International Monetary Fund and the World Bank are expected in Islamabad on September 7 to discuss outside economic support. The team is likely to demand tough austerity measures in Pakistan, including government layoffs and tax hikes.

Prime Minister Nawaz Sharief will announce an economic revival package during the next week or so aimed to bring ''fundamental structural reforms in the economy,'' deputy chief of National Planning Commission Ahsan Iqbal said.

He said the package would include programmes to stimulate industrial, natural resource and agricultural production, boost exports and reform government institutions and legislation. Iqbal would not give details until the package is released.

''Without revamping our institutions, slashing down the administration, removing distortions in our laws and (exercising) good government, we would be back to square one even if we get foreign loans,'' he said.

Pakistan depends on foreign aid to cover its budget deficit, and was jolted when the IMF stopped the one payment of a phased, three-year, $ 1.56 billion loan package as part of economic sanctions following the nuclear tests.

On last Friday, Nawaz Sharief's financial adviser Hafeez Pasha said Pakistan now needs $ 4.5 billion to cover its balance of payments gap, and hopes to raise the money at home and through such global lenders as the IMF.

Pakistan is expected to face tough conditions for a bailout package from the IMF, including sharply increased utility rates, a broader tax base, imposing taxes on agriculture and speeding up the privatisation of state institutions.

But Iqbal said Pakistan needed to revamp its economy anyway.

''We are not doing this on some external pressure or over the dictates of the IMF. We are carrying out these steps because we think they are right,'' he said.

Both Pakistani and IMF officials have said they hope a bailout package can be agreed on during meetings in Islamabad, and approved next month by the IMF board.

UNI