Progress on these issues was severely threatened in 2008 by a sharp decline in Pakistan's economic stability, culminating in an immediate need for capital assistance. Pakistan needed $4 billion to $5 billion in assistance by the end of November in order to avoid defaulting on maturing sovereign debt obligations. During the autumn of 2008, Pakistan sought the needed capital from a variety of sources, including the International Monetary Fund (IMF), China, Saudi Arabia, the United States, and an informal group of nations known as the "Friends of Pakistan." In a February 2009 report, the Atlantic Council stated, "Pakistan faces dire economic and security threats that threaten both the existence of Pakistan as a democratic and stable state and the region as a whole." The Atlantic Council called for an additional $4 billion - 5 billion of immediate financial aid for Pakistan to avert "an economic meltdown." Other legislation has been introduced during the 111 th Congress designed to help improve the economic situation in Pakistan. In the autumn of 2008, Pakistan was in danger of defaulting on its sovereign debt. Zardari reportedly sought $100 billion in aid from the group. On October 22, 2008, the IMF released a statement announcing that "The Pakistani authorities have requested discussions with the IMF on an economic program supported by financial assistance from the Fund to meet the balance of payments difficulties the country is experiencing.... " The Pakistani government, however, denied at that time making a formal request to the IMF. Terms of the Loan

Under the agreement with the IMF, Pakistan is to be provided up to $7.6 billion over 23 months. Pakistan's Continuing Economic Problems

Assuming Pakistan is able to secure the additional capital assistance it needs, it will not end the nation's economic problems. Implications for U.S. Relations

As previously mentioned, the U.S. government considers a stable Pakistan important for several reasons. During her February 2009 trip to Asia, Secretary of State Hillary Clinton asserted that the current economic crisis, if left unresolved, could "breed instability." Even before Pakistan's capital crisis began, some analysts maintained that there was a need for the United States to demonstrate its commitment to a stable and democratic Pakistan with an increase in non-military assistance.
Pakistan, a key U.S. ally in global efforts to combat Islamist militancy, is facing a serious capital crisis. In the autumn of 2008, Pakistan was in urgent need of an estimated $4 billion in capital to avoid defaulting on its sovereign debt. The elected government of President Asif Ali Zardari and Prime Minister Yousaf Raza Gillani sought short-term financial assistance from a number of sources, including the International Monetary Fund (IMF), China, and an informal group of nations (including the United States) known as the "Friends of Pakistan."
The Pakistani government reached an agreement with the IMF for $7.6 billion in loans, but their capital crisis continues. In February 2009, Pakistan requested an additional $4.5 billion in assistance from the IMF and Prime Minister Gillani traveled to Beijing seeking financial support. According to a recent study by the Atlantic Council, Pakistan needs $4 billion - $5 billion in the next 6 to 12 months to avoid another possible default.
Pakistan's continuing capital crisis is affecting the nation's overall economic performance and raising concerns about its political stability. During her Asia trip in February 2009, Secretary of State Hillary Clinton made several references to the importance of solving Pakistan's economic problems in the continued campaign to combat Islamic militants in the region. The Atlantic Council has called for an increase in U.S. assistance "to avert an economic meltdown." The severity of Pakistan's economic situation has also been raised by several members of Congress.
Several different research groups have recently issued reports on the situation in Pakistan that contain recommendations on what the United States could do to help alleviate Pakistan's economic problems. There are indications that Congress may consider some of these recommended actions, including an increase in U.S. non-military assistance and the creation of "reconstruction opportunity zones" in Pakistan.
This report will be updated as circumstances warrant.