(Repeats, extended distribution, no changes to the text)
* Pakistan expects IMF to avert currency crisis
* Imran Khan has promised reforms to help poor people accelerate tax hikes
* Shake state-owned enterprises also on the agenda
* IMF bailout conditions could collide with populist spending commitments
* Probable finance minister has not ruled out instead to go to China
By Drazen Jorgic
ISLAMABAD, July 27 (Reuters) – The Stock and bond markets have welcomed Imran Khan's victory in Pakistan's controversial elections, but the former cricket hero is facing a severe blow to avert a currency crisis and implement long-term reforms that end decades of boom-and-bust cycles ,
Khan's first major economic call will be to decide if pressure on the rupee should be mitigated by the search for Pakistan's 1
It will be even harder to persuade more people to pay taxes in a nation known for tax evasion, cut off subsidies that relieve government coffers, and reform deficient state-owned companies that governments had to sell.
"The country's position is such that you can no longer maintain the status quo," said Suleman Maniya, head of research at local brokerage Shajar Capital. "Speed is crucial."
The Pakistani central bank has devalued the currency four times since December and weakened the rupee by more than 20 percent to avert the $ 305 billion dollar balance of payments crisis. A similar scenario in 2013 resulted in Pakistan receiving a $ 6.7 billion loan from the IMF.
While the economy is growing at 5.8 percent, the fastest growth in 13 years, Pakistan's current account print looks bearish.
The country's central bank is worried about rising global oil prices – Pakistan imports about 80 percent of its oil needs – and dwindling foreign exchange reserves, which plummeted from USD 16.4 billion in May 2017 to just over USD 9 billion last week.
Pakistan's current budget deficit widened 43 percent to $ 18 billion in the fiscal year ended June 30, while the budget deficit rose to 6.8 percent of the economy.
"Pakistan faces the biggest economic challenge in the country's history," Khan said in his victory speech Thursday, outlining a reform agenda.
"Our economy is dwelling on our dysfunctional institutions, we need to fix our governance systems."
If Khan addresses the IMF, the Washington-based body will likely need spending cuts to reduce the budget deficit His populist promises to improve the lives of the poor could jeopardize construction of world-class schools and hospitals.
During the election campaign, Khan has taken up the Pakistani tax evasion practice that is prevalent across South Asia, meaning that only about 1 percent of the population pays income tax.
The increase in this number would be a major coup for the economy and Khan, who has vowed to reform the FBI in his first six months in office.
He also promised to step up an anti-corruption campaign, although this could trigger capital flight in a country where vast wealth is undocumented, analysts say.
Another direct focus will be on the reform of state giants such as Pakistan International Airlines and various utilities that the previous government tried to privatize.
Exotix Capital, a research institute, said that Pakistan's long-term perspective depends on whether Khan can improve governance and stop the culture of the powerful, deduct taxes and relieve state-owned enterprises, thereby increasing the tax burden.
"Otherwise we're just on the same path (advice for investors): Buy Pakistan when it comes to the IMF and sell it before the IMF loan ends," Exotix said in a research note.
Khan's ambitions for reform are fueled by his strong ties with the strong military and judiciary, who advocate his anti-corruption stance, analysts say.
His better-than-expected survey results also mean that he will be able to form a coalition with a handful of small parties that are unlikely to stand in the way of his reforms.
"Imran Khan is unlikely to be an investor's best choice to lead a country in such a precarious position, but any leader with the ability to form a government and make tough decisions is better than a protracted stalemate" said Carmen Altenkirch. Emerging Markets Sovereign Analyst at Aviva Investors.
Pakistan's benchmark stock index has risen 3.5 percent since it became clear Thursday morning that Khan would gain a strong mandate while Pakistan's government bonds rallied throughout the curve.
Khan's economic agenda is likely to be entrusted to Asad Umar, former managing director of Engro, Pakistan's largest conglomerate, which was widely selected as Minister of Finance.
Days before the vote, Umar told Reuters that a PTI government would not rule out asking China for a bailout plan rather than turning to the IMF, which he partly "owed" to the economic crisis because he was the last The government allowed skipping reforms.
"The real problem is that the competitiveness of the Pakistani economy has plummeted – harvest after harvest, industry after industry has not become competitive," said Umar, responsible for low productivity and skill levels of companies, high input costs, lack of scale, and political intervention in some industries.
"Until you restore that core competitiveness, we will continue." (Editing: Alex Richardson)