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Sunday, September 28, 2008

Pakistan’s Faith in Its New Leader Is Shaken - Jane Perlez

Moody’s, the international credit rating agency, cut Pakistan’s credit outlook from “stable” to “negative” on Tuesday, citing dwindling foreign exchange reserves, risks from extremists and high inflation. Foreign exchange reserves have shrunk to $5.7 billion, with only about $3 billion available to cover payments for oil and food, according to the International Monetary Fund. A major disappointment for the government has been the failure of Saudi Arabia, a traditional benefactor, to announce concessions on oil. In past economic crunches, Saudi Arabia has agreed to defer payment for the 100,000 barrels of oil Pakistan imports daily from the kingdom, the economists said. That has not happened this time, and even with the recent drop in oil prices, Pakistan is eating through its reserves at the rate of about $1.25 billion a month, Pakistani economists say. “The international community cannot allow Pakistan to become a failed state,” said a senior economist from one of the international financial institutions trying to salvage the economy.


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