Frank-Walter Steinmeier, Germany's foreign minister, warned on Tuesday that the world had less than a week to prevent a full-blown financial crisis in Pakistan, as Islamabad said it expected to strike a preliminary agreement with the International Monetary Fund in a day or two.
Speaking in Islamabad, Mr Steinmeier called on the IMF to save the nuclear-armed country from bankruptcy by extending an "appropriate loan".
"I hope the decision will be taken soon. It won't help to have it in six months, or six weeks. Rather, we need it in the coming six days," he said after meeting Pakistan's president Asif Ali Zardari and foreign minister Shah Mehmood Qureshi.
Shortly after he made his remarks, a Pakistani official told the Financial Times that negotiations with the IMF were "in the final stages" and that the government expected agreement on a letter of intent with the Fund "within one or two days".
The official said that a letter of intent would be followed by a formal request to the IMF's board for funding, with an agreement likely to be finalised by mid-November.
"It is a precarious situation which has to be tackled," said Abid Hasan, former adviser on Pakistan to the World Bank, referring to the need for international financial assistance. "Time is running out".
Foreign governments fear that a growing balance of payments crisis could further destabilise the country and imperil its fragile security situation.
Pakistan needs $4bn-$5bn for the financial year to June 2009 to meet debt payments and other liabilities, according to finance ministry officials in Islamabad.
An official at the central bank said the country's foreign currency reserves stood at $4bn and were likely to run out by the end of November. "We have a very narrow space to put the country back on the rails," he said.
An IMF programme is expected to last till June 2010 and could be worth a total of $12bn-$15bn, officials say.
Technical discussions between IMF staff and Pakistani officials have been taking place in Dubai because the IMF has barred staff members from travelling to Islamabad following a suicide bombing of the Mariott hotel in the city in September.
Earlier on Tuesday, Moody's, the rating agency, downgraded Pakistani government bonds and signalled that it may cut its rating further.
Mr Steinmeier pledged to support Pakistan in its negotiations with the IMF. He is also expected to lobby Middle East countries for help on Pakistan's behalf ahead of a donor conference in Abu Dhabi in mid-November.
He said Germany would provide both short and long-term assistance at the "Friends of Pakistan" donor conference. The group, which includes the US, the European Union, the UAE and China, was established on the sidelines of the United Nations General Assembly last month to help stabilise Pakistan's economy.
