The International Monetary Fund (IMF) on Friday announced that it has reached a staff-level agreement with Pakistan on a USD 3 billion stand-by arrangement, reported Reuters. This decision comes after a prolonged wait by the South Asian nation, which is on the verge of default.
Subject to approval by the IMF board in July, the agreement, which comes after an eight-month delay, brings a measure of relief to Pakistan. The country is currently grappling with a severe balance of payments crisis and dwindling foreign exchange reserves.
According to IMF’s mission chief for Pakistan, Nathan Porter, the recently established stand-by arrangement builds upon the 2019 programme. In a statement on Thursday, he noted that Pakistan’s economy has encountered multiple challenges in recent times, including the destructive floods from last year and the rise in commodity prices 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 the 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.”
“The economy has faced several external shocks such as the catastrophic floods in 2022 that impacted the lives of millions of Pakistanis and an international commodity price spike in the wake of Russia’s war in Ukraine,” added Porter.
“As a result of these shocks as well as some policy missteps… economic growth has stalled,” said the statement.
What is Pakistan actually getting?
As per the lender, the nine-month Stand-By Arrangement (SBA) will provide Pakistan nearly USD 3 billion, which is equivalent to 111% of its IMF quota.
The agreement is still pending approval from the IMF’s Executive Board, which is anticipated to review the request by mid-July.
Typically, such approvals are granted once a staff-level agreement has been reached. According to Reuters, the Pakistani government had initially expected to receive approximately USD 2.5 billion from the IMF.
