The International Monetary Fund (IMF) reached a staff-level pact with Pakistan on a $3-billion stand-by agreement, the lender said on Thursday, a decision long awaited by the South Asian nation, which is teetering on the brink of default.
The deal, subject to approval by the IMF board, comes after an eight-month delay and offers some respite to Pakistan, which is battling an acute balance of payments crisis and falling foreign exchange reserves.
Pakistan’s central bank had raised its benchmark interest rate by 100 basis points to 22 percent at an emergency meeting on Monday, a day after the country revised its budget for the fiscal year from July 1 in a bid to rescue the IMF program.
“The IMF staff and the Pakistani authorities have reached a staff-level agreement on policies to be supported by a Stand-By Arrangement (SBA). The staff-level agreement is subject to approval by the IMF Executive Board, with its consideration expected by mid-July,” IMF said in a statement released on Thursday.
The statement said that the new stand-by agreement will support the Pakistani authorities’ immediate efforts to stabilize the economy from recent external shocks, preserve macroeconomic stability and provide a framework for financing from multilateral and bilateral partners.
According to the statement, the new stand-by agreement will also create space for social and development spending through improved domestic revenue mobilization and careful spending execution to help address the needs of the Pakistani people.
“Steadfast policy implementation is key for Pakistan to overcome its current challenges, including through greater fiscal discipline, a market-determined exchange rate to absorb external pressures, and further progress on reforms, particularly in the energy sector, to promote climate resilience, and to help improve the business climate,” the statement added.