Pakistan and the IMF sign a $3 billion staff level agreement

The International Monetary Fund (IMF) has reached a staff-level pact with Pakistan on a $3 billion stand-by arrangement, the lender said, a decision long awaited by the South Asian nation which is teetering on the brink of default.
Prime Minister Shehbaz Sharif meets with managing director of the International Monetary Fund, Kristalina Georgieva, in Paris, France on June 22. — PID via Reuters

The agreement comes after an eight-month delay and provides some relief to Pakistan, which is suffering a severe balance of payments problem and declining foreign exchange reserves. It is subject to confirmation by the IMF board in July.

The $3 billion in payment, spread out over nine months, is more than Pakistan was anticipating. The remaining $2.5 billion from a $6.5 billion bailout package agreed upon in 2019 that expired on Friday was still pending disbursement to the nation.

IMF representative Nathan Porter said in a statement on Thursday that the new stand-by agreement builds on the 2019 plan and noted that Pakistan's economy had recently been confronted with a number of difficulties, including disastrous floods last year 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.”

A staff-level agreement for a vital bailout deal with the IMF was "very close" and expected in the next 24 hours, according to Finance Minister Ishaq Dar's statement from last night.

$4 billion has already been made available. Dar previously told the media that the government was developing a procedure to try to release the entire $2.5 billion still held in escrow under the IMF programme.