With its currency hitting its lowest ever and foreign exchange reserves falling, Pakistan has approached the International Monetary Fund to seek financial aid and also presented a programme for market reforms.
The move by Islamabad comes as it is also approaching Western and Gulf donors for rescue packages at a time when its foreign exchange reserves fell to a six-year low of less than $8 billion.
Experts have said Pakistan's foreign exchange reserves, in real terms, are barely adequate to cater for imports for one-and-half months.
US and diplomatic sources in Washington told the Dawn newspaper that President Asif Ali Zardari had returned from his recent visit to China without a commitment for aid needed to shore up the economy.
Faced with the possibility of defaulting on current account payments, Pakistan had no option but to seek money from the IMF.
"The outlines of the programme will emerge during this week. The IMF is expected to convey its opinion to Pakistan by Tuesday or Wednesday," said a source familiar with Pakistan's talks with the IMF.
An IMF-backed plan will require Pakistan to cut spending and raise taxes, among other measures, and this could hurt the poor. Pakistani officials engaged in negotiations with the IMF and other donors said they had had 'very positive' talks.
"We will get out of the wood," said one official.
"We may or may not take money from the IMF but we are seeking their endorsement because it will help us get assistance from others."
Another official noted that China, considered Pakistan's strongest ally, had refused to provide financial aid without conditions.
"People should realise that when even China is unwilling, others are not going to come forward...Economic realities determine relations with other governments and international financial institutions, not romance," he said.
Pakistan is engaged in 'very delicate negotiations on all sides, with IMF officials, with other governments and we remain optimistic', another official said.
Pakistan hoped to get support from the Friends of Pakistan group, formed last month to help the country overcome its economic problems, the official said.
The group is scheduled to hold its first working session in Abu Dhabi in the first week of November.
"We also hope to get standby facility from the IMF," said the official.
He said Shaukat Tareen, financial advisor to the Prime Minister, had 'very positive' discussions with IMF and World Bank officials in Washington last week.
Other experts, including former finance minister Shahid Javed Burki, have advised Pakistan not to enter into an IMF programme.
"The IMF conditions will constrain Pakistan," Burki said.
"At this stage, Pakistan needs to avoid constraints. The government should have a free hand to spend on power development, creating employment and on other similar measures."
An official involved in talks with the IMF said while the government respected Burki's point of view, it wanted to keep its options open.
"The IMF is not our first preference. It is true that the Fund places tough conditions but other donors will have conditions too," the official said.
The official noted that in 1999, the government of former military ruler Pervez Musharraf faced a similar situation and was forced to borrow money from the IMF.
"IMF's assistance is like credit approval," the official said. "If you have this approval, others will assist you as well."
