Pakistan's Capital Crisis: Implications for U.S. Policy

Pakistan -- a key U.S. ally in global efforts to combat Islamist militancy -- is 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 is seeking 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 reportedly has reached a tentative agreement with the IMF for 7.6 billion in loans, but has reservations about conditions on the assistance, expressing concerns that they may create political and economic problems. The current crisis has placed some strain on U.S.-Pakistan relations. This report will be updated as circumstances warrant.