A currency dealer counts US dollars in Karachi. (Reuters)

Islamabad, Oct. 17 (Reuters): Pakistan moved closer to a balance of payments crisis today, as the rupee slumped to a record low after the central bank reported it had barely enough foreign currency to cover six weeks of imports.

Islamist militants seeking to destablise a nuclear-armed US ally stand to gain most from an economic meltdown in Pakistan.

A six-month-old civilian government, headed by President Asif Ali Zardari, is banking on international support for Pakistan’s transition to democracy after more than eight years under former army chief Pervez Musharraf.

Pakistani officials have been to Beijing, Washington, and the Gulf to whip up financial support, but there have been no firm commitments.

As of October 11, Pakistan’s foreign currency reserves totalled $7.75 billion, having fallen $570 million in a week.

Critically, the central bank’s share of this has fallen to $4.34 billion, while commercial banks held $3.41 billion.

As a result of deteriorating external balances and dwindling reserves the rupee fell almost 2.8 per cent today to a record low of 84.40, having lost 27 per cent since the start of 2008.

There have been uncorroborated reports in the media that Pakistan’s reserves are in a more perilous state.

The News daily said today central bank reserves had slid to just under $4 billion as of October 16 and out of that $1.5 billion had been consumed by currency forward booking liabilities.

A source with knowledge of the external position said a big capital infusion was needed in the next one to one-and-a-half months: “Otherwise there will be a serious problem.”

The data shows the central bank has barely enough foreign currency to cover six weeks of imports. Including commercial bank reserves, it has two months’ cover.

Up to $4 billion is needed urgently, according to Sakib Sherani, a bank economist on the Prime Minister’s economic advisory council.

Pakistan needs $7 billion to cover a projected current account deficit of $14 billion for the fiscal year to June.

The international bond market has already priced in a default on a $500 million bond due to mature in February.

Economists say Pakistan is shedding reserves at a rate of about $1 billion a month.

Imports totalled $3.8 billion in September. Exports were $1.78 billion, creating a trade deficit of $2.207 billion.

In July-September the current account deficit widened to $3.95 billion from $2.27 billion in the same period a year ago. The main factors behind the widening deficit are soaring oil and food prices, compounded by a poor wheat crop last year.

Shaukat Tarin, a respected banker appointed economic troubleshooter last week, said on Monday he was sure Pakistan would fulfil upcoming debt obligations of $3 billion.

The source with knowledge of the external situation was sure Pakistan would not default on the $500 million bond in February. Inflation at 25 per cent is a good reason to raise interest rates, but a rapid slowdown in economic growth limits the scope.