ISLAMABAD (AP) — Pakistan says it will seek a bailout loan from the International Monetary Fund to address a mounting balance of payments crisis, Finance Minister Asad Umar said Monday.
Umar said he will hold talks with IMF officials later this month.
Analysts say Pakistan hopes to secure $8 billion in loans to avoid an economic meltdown. It also wants fresh loans from China, which has already invested heavily in roads and the energy sector.
After a visit last week, the IMF issued a report saying Pakistan is facing significant economic challenges, with declining growth, high fiscal and current account deficits, and low levels of international reserves.
IMF senior economist Harald Finger, who led the visit, said the problems mostly stemmed from an overvalued exchange rate and excessively easy credit.
"The fast rise in international oil prices, normalization of US monetary policy, and tightening financial conditions for emerging markets are adding to this difficult picture. In this environment, economic growth will likely slow significantly, and inflation will rise," he said in a statement.
Washington, which recently suspended military aid to Pakistan over its alleged failure to crack down on the Taliban, has expressed concern about IMF funds being used to repay Chinese loans.
Pakistan has been approaching the IMF since the 1980s, and received a $6.7 billion loan in 2013.
The IMF report said Pakistan's government has already begun moving in the right direction but had not gone far enough.
"Decisive policy action and significant external financing will be needed to stabilize the economy," it said.
It urged the government to relax controls on its currency and to do more to help the poor to help lay the foundations for sustainable growth.