Cash-strapped Pakistan strikes $3 billion standby bailout deal with IMF
What's the story
Pakistan has reached a staff-level agreement with the International Monetary Fund (IMF) for a $3 billion loan program, the global lender said.
The deal, which came after Pakistan on Monday raised its main interest rate to a record-high of 22%, is currently on standby until the IMF's board approves it.
Experts said the deal may put the country's economy back on track.
Context
Why does this story matter?
The deal, which comes after an eight-month delay, is higher than expected.
Laden with debt, Pakistan secured a $6.5 billion bailout from the IMF in 2019. However, the IMF held back $2.5 billion, demanding economic reforms.
Hit by a global energy crisis and devastating floods last year, the country has been struggling to stabilize its economy against financial mismanagement and political turmoil.
Statement
Flood, Russia-Ukraine war, and policy missteps hampered growth: IMF
The IMF's mission chief for Pakistan, Nathan Porter said, "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."
"As a result of these shocks as well as some policy missteps...economic growth has stalled," he added.
Details
$3 billion to be spread over nine months
The IMF's Executive Board is expected to approve the deal in July. The board usually grants deals once they have been agreed upon at the staff level.
The $3 billion funding will be spread over nine months.
Earlier this year, Pakistan's foreign reserves dropped to a level that only covered less than three weeks of imports. In May, its inflation rate touched almost 38%.
Information
Pakistan received $9 billion from around the world after floods
Pakistan hopes the deal will boost the economy and catalyze additional funding from bilateral and multilateral sources, which would help the country repay external debts. Following the floods in Pakistan, donors from around the world pledged over $9 billion to help the nation last year.