WASHINGTON, Oct 25: The International Monetary Fund never asked Pakistan to cut military spending by a third, although it has urged the country to take a number of painful economic measures, a senior Pakistani diplomat told Dawn on Saturday.

Intensive Pakistan-IMF consultations have been taking place in Dubai since Tuesday, for a bailout plan to avert possible debt default.

Both sides are believed to have agreed in principle on the need for help that was decided in their meetings in Washington in September.

If the talks succeed, the Fund’s board of governors, which meets in Washington on Nov 7, can approve a loan of about $9.6 billion from the IMF over three years at a six per cent interest rate.

Islamabad immediately needs $4 billion to $5 billion to stabilise the economy and enhance confidence in its financial system.

“There have been suggestions of general reductions in expenses but not a word about the military,” said the Pakistani diplomat who is aware of the ongoing negotiations between Pakistan and the IMF to bailout the country from a possible economic collapse.

“These are wrong speculative stories,” said the diplomat when asked to comment on reports published in a section of the press that the IMF had asked Pakistan to cut military spending by a third.

The diplomat pointed out that same stories also claim that the IMF and other donors wanted to help Pakistan because they thought the country had a key role to play in the war against the Taliban and Al Qaeda.

“How can you fight the militants without a strong army?” the diplomat asked.

“The United States and other allies want Pakistan to play a greater role in this war and they know that this cannot be done by downsizing the army.”

The diplomat, however, acknowledged that the US wanted Pakistan to “refocus its military strategy on fighting the militants” instead of devoting most of its resources on confronting India.He said that the IMF and Pakistan were discussing various proposals to reduce expenses but nothing had been finalised yet.

“The measures being discussed include reducing the trade gap, readjusting balance of payment and other similar steps needed to strengthen the economy,” he said.

Apparently, the IMF is willing to help Pakistan on the condition that it will have a major say in the country’s economic policies.

The conditions include allowing six IMF and two World Bank directors to oversee preparations for the country’s next budget. They would also have a say in the affairs of the State Bank of Pakistan as well.

IMF officials will also monitor tax collection at the provincial level.

Among the reforms suggested by the IMF is a proposal to reduce the number of pensionable government jobs by almost half.

Pakistan is awaiting outcome of the ‘Friends of Pakistan’ conference in Abu Dhabi next month and the ongoing negotiations with international financial institutions, before accepting IMF’s conditions. But vibes coming from these sources for urgent cash of about $4 billion it needs, are far from optimistic.

Earlier this week, some US media outlets quoted a senior US State Department official as saying that the Pakistanis were not happy with IMF’s conditions but they were forced to go to the Fund because other donors were not willing to help.

The US media reported on Saturday that President Asif Ali Zardari plans to visit Saudi Arabia early next month to urge the kingdom to rescue Pakistan.

Earlier this month, Saudi Arabia, China and the United States refused to provide large cash advances to Pakistan before the country undertakes the much-needed economic reforms.

Pakistan is now rated among the worst credit risks in the world, ahead of only the Indian Ocean Seychelles islands in the Standard & Poor’s index.