ISLAMABAD – The International Monetary Fund has agreed to provide $3 billion to Pakistan in badly needed relief to help bail out the impoverished country's ailing economy.
The nine-month agreement must be approved by the IMF’s Executive Board, which is expected to make a final decision in mid-July, a top IMF official, Nathan Porter, said in a statement late Thursday.
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The announcement followed talks earlier this week between Pakistani Prime Minister Shahbaz Sharif and Kristalina Georgieva, the managing director of the IMF, who both suggested that the sides were close to reaching an agreement.
Porter, the IMF’s mission chief to Islamabad, said Pakistan’s economy has faced several heavy blows recently, such as the devastating floods last summer that killed 1,739 people, caused $30 billion in damage and impacted millions of Pakistanis. The country was also hit by an international commodity price spike in the wake of Russia’s war in Ukraine.
Porter said despite the authorities’ efforts to reduce imports and the trade deficit, reserves have declined to very low levels and liquidity conditions in the power sector also remain acute.
“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," an IMF statement read.
Porter said over the past few days, the Pakistani authorities had “taken decisive measures to bring policies more in line with the economic reform program supported by the International Monetary Fund,” including Parliament passing a revised budget.
The proposed package is higher than what Pakistan was expecting as it awaited the release of a remaining tranche from a 2019 bailout of $6 billion that expired on Friday. That deal was signed by Sharif's predecessor, former Prime Minister Imran Khan.
There were a lot of uncertainties about what would happen after June, said Mohammad Sohail, who heads Topline Securities. “Now this funding of 3 billion dollars for nine months will definitely help restore some investors' confidence.”
On Friday, Sharif tweeted that the arrangement will help strengthen Pakistan’s foreign exchange reserves, enable the country to achieve economic stability, and put it on the path of sustainable economic growth.
Sharif thanked the IMF for the new, stand-by arrangement as the deal is called. Later Friday , he also expressed his gratitude to China, Saudi Arabia and United Arab Emirate for their financial help over the past months. He said his government has prepared a master plan for economic revival.
Speaking in the eastern city of Lahore, Sharif also reiterated his criticism of Khan over violent opposition protests last month and blaming the former premier for the country's economic turndown.
“If we fully implement our plan ... we will achieve the target of a stable economy and become a prosperous country,” Sharif said. .
Finance Minister Ishaq Dar also welcomed the agreement with the IMF.
Talks between Pakistan and the IMF had stalled in December after the global lender delayed the last crucial tranche of the previous bailout. The two sides were at odds over what the fund said was Islamabad’s unsatisfactory compliance with the bailout conditions.
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This story was corrected to show that the amount of the expiring IMF package was $6 billion, not $6.5 billion. It was also corrected to say that Sharif's tweet was on Friday.