Islamabad  - The International Monetary Fund (IMF) has agreed to approve a second tranche of 800 million dollars of its 7.6-billon- dollar program to save Pakistan from defaulting on external payments, a senior official said on Wednesday.

"The Executive Board of the IMF will approve the second tranche for Pakistan by the end of March 2009," Pakistan's Finance Secretary Waqar Masood told Deutsche Presse-Agentur dpa from Dubai, where the sides concluded the talks.

The two teams agreed on all major macroeconomic targets for the fiscal year ending on June 30 as they reviewed financial targets set for the country to qualify for the second tranche of the IMF mission's loan approved in November 2008.

The organization said the country was on track to comply with its economic programme. But, it warned, "the deterioration in the global economic environment and weaker economic activity call for an update of the economic framework and a recalibration of economic policies."

A senior Pakistani official privy to the talks who spoke on condition of anonymity said that the country's Gross Domestic Product (GDP) target had been revised downward from 3.5 per cent to 2.5 per cent for the ongoing fiscal year, as suggested by the IMF.

Officials from the world organization and Pakistan also agreed to envisage GDP growth target of 4 per cent for the next 2009-2010 budget.

Pakistan's central State Bank would decrease discount rates by March if the policy core inflation was brought down. Otherwise, tight monetary policy would continue in the remaining period of the ongoing fiscal year, said the official sources.

General inflation has been brought down from an annual target of 23 per cent to 20 per cent for the ongoing fiscal year, while the tax collection target was revised downward from 1,360 billion rupees (around 17 billion dollars) to 1,300 billion rupees (16.35 billion dollars) or 10 per cent of the GDP for the ongoing financial year.

Pakistan, a key ally of the West in the war against terrorism, is witnessing deteriorated law and order situation with growing militancy in its volatile tribal areas, affecting foreign investment.

The country approached the IMF last year for a rescue package as it grappled with a 30-year high inflation rate and fast-depleting reserves that held barely enough to cover nine weeks of import bills.

Pakistan has requested to raise by 4.5 billion dollars to the approved 7.6-billon-dollar loan in the ongoing talks with the organization. It was not clear whether the request was commended. (dpa)