Pakistan is in deep financial crisis- this week they had their government bond rating dropped by rating agencies (to CCC+, a grade described as "junk").
Note that the sort of amounts Pakistan needs to keep from defaulting on its debts are pocket change in proportion to US military spending.
http://thenews.jang.com.pk/daily_detail.asp?id=140493
Sunday, October 12, 2008
Following talks between the visiting Iranian foreign minister, his Pakistan counterpart and Prime Minister Yusuf Raza Gilani, Iran has indicated it may be ready to offer an economic lifeline to Pakistan in the form of oil on deferred payments. Help of this kind is desperately sought by Pakistan, with its growing economic crisis having created a severe balance of payment problem. Analysts have warned the country could default on debt repayments unless it can quickly acquire $3 billion. Pakistan has already sought a similar oil facility from Saudi Arabia, and is now hoping for a positive response from these allies. The response from Iran, which has stated it is ready to go ahead with a project to pipe in gas from its fields to South Asia, even without India, has been positive. It has already offered oil on a deferment of three months. Pakistan has sought a longer time frame, for which permission is to be sought in Teheran.
The Iranians have thus offered hope that Pakistan's most immediate problems can be eased, enabling it to stay afloat. The economic crisis, causing stocks to plummet, has already led to fears the Karachi Stock Exchange may be shut down. But beyond this, the overture by Teheran also indicates a readiness to increase cooperation. This is important, for a stable regional situation and good ties with neighbours are crucial for Pakistan. The elected government has already stated it is aware of this. The early success in diplomacy with Iran suggests it is also ready to work towards this goal.
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