By Our Business News Staff
The state of the Pakistan economy has caused the Export Credits Guarantee Department to take the rare step of suspending its insurance cover for exports to the country and is facing the World Bank with a serious crisis over loans.

The Export Credits Guarantee Department's commitments will be honoured but no new contracts will be covered. For policies covering shipments only, no further shipments will be covered.

The suspension has been made because of the deteriorating state of the Pakistan economy, caused by natural disasters and the civil war. Both of these factors have, in the view of the E.C.G.D., undermined the foreign exchange earning capacity of Pakistan, and thus its ability to pay for its imports.

The eastern region of the country has been the principal earner of foreign exchange.

Inevitably, once the E.C.G.D. withdraws its cover British exporters will refuse to extend credit to their customers in Pakistan.

British sales to Pakistan in 1970 were a little over £49m., while imports were more than £35. In the first three months of this year British exports to the country were valued at £14,317,000. some £5,287,000 in March alone.

Only a few countries have had cover withdrawn by the E.C.G.D. in the past decade. One of the most recent cases was Nigeria during the Biafran war.

British exports to Pakistan consist mainly of capital goods. In the past agricultural machinery, fertilizer plant and chemical works have been the main items of export, Imports from Pakistan include jute, textiles, leather goods and sports equipment.

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Anthony Thomas, United States Economics Correspondent, writes from Washington: The World Bank is facing perhaps the most serious crisis in its history over loans to Pakistan, where the central Government is trying to reassert its authority in East Pakistan.

Pakistan is the World Bank group's second largest customer after India and, according to a bank official, about $500m. is outstanding in loans to Pakistan. A further substantial amount has been committed but not yet disbursed,

The difficulty is that unless the World Bank continues to disburse money and agrees to a rescheduling of debts on money already given it could provoke the Pakistan Government into declaring a moratorium on debt repayments.