Pakistan imperils its IMF rescue as Afghanistan border violence rages

Pakistan can ill afford to go to war. Neither can Afghanistan. Yet here they are, trading blows across one of South Asia’s most combustible borders – just as a team of International Monetary Fund inspectors arrived in Islamabad to decide on the country’s next financial lifeline.The inspectors had come for a third-round review of Pakistan’s economic recovery programme: the kind of visit that, if it went well, would unlock the next tranche of rescue funding and steady the nerves of skittish investors.But with retaliatory air and drone strikes killing dozens and no sign of fighting easing after more than a week, it is not going well.“The timing of the recent strikes is particularly unfavourable,” said Callee Davis, senior emerging markets economist at Oxford Economics.Stockbrokers monitor share prices at the Pakistan Stock Exchange in Karachi on Monday. Photo: AFP“IMF staff are currently in Pakistan to negotiate the third review, which is expected to unlock the next tranche of funding.”Pakistan’s economic picture had been improving. Inflation was easing. Investor sentiment, battered for years, had strengthened. Then, late last month, the shooting started.