Pakistan and the International Monetary Fund have agreed at the staff level to a $3 billion stand-by arrangement, the lender announced. The South Asian country, which is on the verge of default, has long awaited this decision.
The eight-month postponement in the agreement, which is pending IMF board approval in July, gives Pakistan some relief as it struggles with a severe balance of payments deficit and declining foreign exchange reserves.
For Pakistan, the $3 billion funding over nine months is more than anticipated. The remaining $2.5 billion from a $6.5 billion bailout package negotiated in 2019 that had since expired was still pending release to the nation.
According to IMF representative Nathan Porter, the new stand-by agreement expands upon the 2019 programme. Porter also noted that Pakistan's economy had recently been confronted with a number of difficulties, including the terrible floods of 2017 and rising commodity prices as a result of the conflict in Ukraine.
"Despite the authorities' efforts to reduce imports and the trade deficit, reserves have declined to very low levels. Liquidity conditions in the power sector also remain acute," Porter said in a statement.
"Given these challenges, the new arrangement would provide a policy anchor and a framework for financial support from multilateral and bilateral partners in the period ahead."