Pakistan Staves Off Default, Reaches Much-Awaited Deal With IMF for $3 Billion Loan Program – News18

In temporary relief for its economy on the brink of collapse, Pakistan has clinched initial approval from the International Monetary Fund for a $3 billion loan program, lowering the risk of a sovereign default.

The staff-level agreement is subject to approval by the IMF Executive Board, with its consideration expected by mid-July, the Washington-based lender said in a statement on its website.

The funds will support the authorities’ immediate efforts to stabilise the economy from recent external shocks, preserve macroeconomic stability and provide a framework for financing from multilateral and bilateral partners, it said.

The $3 billion funding, spread over nine months, is higher than expected for Pakistan. The country was awaiting the release of the remaining $2.5 billion from a $6.5 billion bailout package agreed in 2019, which expired on Friday.

The new stand-by arrangement builds on the 2019 programme, IMF official Nathan Porter said in a statement on Thursday, adding that Pakistan’s economy had faced several challenges in recent times, including devastating floods last year and commodity price hikes following the war 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.”

Meanwhile, Pakistan expected inflows from friendly Arab countries over the next couple of days to close the fiscal year with a higher foreign exchange reserve position.

Pakistan’s economy has been in a free fall mode for the last many years, bringing untold pressure on the poor masses in the form of unchecked inflation, making it almost impossible for a vast number of people to make ends meet.

Pakistan started preparations for the general elections with a meeting of the election commission recently. The current National Assembly will complete its five-year term on August 12 and the fresh general election must be conducted within 60 days as laid down in the Constitution of Pakistan.