Pakistan has received preliminary approval from the International Monetary Fund (IMF) for a $3 billion loan program, reducing the risks of defaulting on sovereign debt.
In a statement on its website on June 29th, the IMF announced that the staff-level agreement is subject to approval by the IMF’s Executive Board, which is expected to consider it by mid-July.
Pakistan’s economy, the fifth largest in the world by population, has been facing a balance of payments crisis as it struggles to service its massive external debt, exacerbated by months of political turmoil that has deterred potential foreign investments.
The country has experienced a significant rise in inflation and a collapse in the exchange rate of the rupee, rendering it unable to meet its import requirements and leading to a sharp decline in industrial production.
Nathan Porter, an official at the IMF, stated in a press release, “I am pleased to announce that the International Monetary Fund staff team has reached a staff-level agreement with the Pakistani authorities on a nine-month Extended Fund Facility arrangement of SDR 2,250 million,” which is equivalent to approximately $3 billion.
This amount represents 111% of Pakistan’s quota with the IMF, according to the French press agency.
The approval of the agreement by the IMF’s Executive Board is expected by mid-July, according to Porter.
The nine-month Extended Fund Facility arrangement is based on the Pakistani authorities’ efforts under the IMF-supported program for 2019, which is set to expire at the end of June.
Negotiations between Pakistan and the IMF regarding the final tranche of a $6.5 billion loan agreed upon in 2019 came to a halt in November, as the government made last-minute changes to the general budget in an attempt to meet the agreement’s conditions.
