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Pakistan and IMF reach $3bn stand-by loan deal

People wait their turn to get fuel at a petrol station, in Karachi, Pakistan Reuters/Akhtar Soomro
People queue to get fuel at a petrol station, in Karachi, Pakistan. The country is teetering on the brink of default

The International Monetary Fund says it has reached a staff-level pact with Pakistan on a $3 billion stand-by arrangement.

The South Asian nation is teetering on the brink of default.

The deal is subject to approval by the IMF board in July.

There was an eight-month delay on the decision but it offers some respite to Pakistan, which is battling an acute balance of payments crisis and falling foreign exchange reserves.

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 standby 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,” Porter said in a statement.

“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.”