Pakistan, IMF reach staff-level pact on crucial $3 billion bailout

 

Islamabad.The International Monetary Fund (IMF) has reached a staff-level pact with Pakistan on a $3 billion stand-by arrangement, the lender said, 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 in July, came hours before the current agreement with the IMF expires later on Friday.

Although essentially a bridge loan, it offers much respite to Pakistan, which is battling an acute balance of payments crisis and falling foreign exchange reserves.The agreement will enable Pakistan to achieve economic stability, and put the country “on the path of sustainable economic growth, God willing,” said Prime Minister Shehbaz Sharif.Pakistan will receive formal documents on the deal later on Friday from the IMF.

Finance Minister Ishaq Dar told Reuters, which he said he would “sign, seal and return by tonight.”He had said on Thursday the deal was expected any time soon.Pakistan’s sovereign dollar bonds were trading higher after the announcement, with the 2024 issue enjoying the biggest gains, up more than eight cents at just above 70 cents in the dollar, according to Tradeweb data.

The gains were most pronounced in shorter-dated bonds, reflecting lingering skepticism over the longer-term fiscal outlook for the country.The country’s domestic stock and currency markets were closed on Friday due to Eid festival holidays.The new stand-by arrangement builds on the 2019 programme, IMF official Nathan Porter said on Thursday, adding that Pakistan’s economy had faced several challenges in recent time.

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. Liquidity conditions in the power sector also remain acute,” Porter said in a statement.