Oct. 7 (Bloomberg) -- Pakistan, with the world's second- lowest credit rating, will send a delegation to the U.S. next week as it seeks $10 billion in emergency assistance to avoid defaulting on its debt.

The government is also expected to meet with the Friends of Pakistan Group in the United Arab Emirates soon, Nasir Jamal, a spokesman for the Finance Ministry, said in a telephone interview today. The group, which met in New York on Sept. 26, includes the U.S., U.K., China, Saudi Arabia and U.A.E. Jamal didn't say who would lead the delegation to the U.S.

Pakistan's credit rating was cut two levels yesterday by Standard & Poor's, which cited doubts about its ability to meet about $3 billion in debt-servicing costs. The nation's foreign- exchange reserves have dropped 67 percent in the past year and the rupee has slumped 27 percent in 2008.

``About $8 billion to $10 billion over 18 months is all we need to get out of this based on our own momentum,'' said Syed Ali Raza, president of National Bank of Pakistan, the biggest lender. ``Our biggest problem is reserves and confidence in the currency.''

Pakistan's balance of payments deficit increased six-fold to $2.5 billion in the first two months of the fiscal year that started July 1 and the current account deficit reached 1.6 percent of the $150 billion gross domestic product, S&P said.

The rupee fell to a record low of 78.48 to the U.S. dollar today.

S&P reduced Pakistan's long-term foreign-currency rating to CCC+ with a negative outlook, above only the Seychelles, rated selective default, according to data compiled by Bloomberg.

IMF Aid

The current economic crisis is the deepest faced by the nuclear-armed nation since 1999, when it came close to defaulting on its debt and reserves plunged to less than $1 billion.

In return for support in the fight against al-Qaeda, the Bush administration pumped $10 billion into Pakistan, much of it military aid, and wrote off debt to help turn the economy around.

Pakistan ended its three-year, $1.5 billion loan program with the International Monetary Fund in December 2004. The government of Prime Minister Yousuf Raza Gilani hasn't said whether it will seek IMF aid.

``Without external assistance, Pakistan doesn't have the resources to meet its obligations,'' said Farid Khan, director of equities at Credit Suisse Pakistan in Karachi. ``Pakistan should seek IMF's assistance now instead of waiting for the eleventh hour. It is already 10:55.''

Riskiest Borrower

Pakistan is the world's riskiest borrower according to credit-default swap prices from CMA Datavision, with investors concerned by the deterioration in security that saw 53 people killed in an attack on the Islamabad Marriott hotel last month.

``It's an extraordinary crunch and the outlook is very grim,'' said Zainab Jabbar, group strategist at Karachi-based IGI Financial Services Ltd. ``There are very serious chances of defaulting.''

The nation's next interest payment on its dollar-denominated bonds is due in December and the government is scheduled to repay $500 million of debt in February.

South Asia's second-biggest economy is forecast by the government to grow at the slowest pace since 2003 this year. The economy expanded at an annual average pace of 6.8 percent over the last five years, helped by record foreign investment.

To contact the reporters on this story: Naween A. Mangi in Karachi at nmangi1@bloomberg.net; Khaleeq Ahmed in Islamabad at paknews@bloomberg.net.

Last Updated: October 7, 2008 05:55 EDT