It seems only months ago that the International Monetary Fund had to fend off attacks on its legitimacy and role. With few full-blown emerging market crises around, its funding model of extending loans to countries in need of foreign currency looked increasingly outdated. But now, amid global financial turmoil, countries are queuing up for support. Pakistan is the most precarious case. It needs help but the IMF has to tread carefully.

Pakistan’s economy is in trouble: growth is slowing; inflation is at a 30-year high; the current account deficit widened to 8.5 per cent of gross domestic product in the past fiscal year; and the IMF estimates the budget deficit to have been 7.7 per cent of GDP. As foreign investors withdrew capital, foreign exchange reserves and the rupee plunged. Markets fret about a balance of payments crisis and Pakistan’s ability to service interest payments on its foreign currency debt.