The International Monetary Fund has announced a $3 billion stand-by agreement with Pakistan that aims to aid its floundering economy. File Photo by Shawn Thew/EPA-EFE
June 30 (UPI) — The International Monetary Fund has reached a staff-level agreement with Pakistan valued at $3 billion, the global lender said as the Asian nation attempts to right a floundering economy that’s been battered by last year’s floods and effects of the Ukraine war.
The agreement is subject to approval by the IMF Executive Board, which is expected to consider it by the middle of next month, it said in a statement.
The deal is expected to infuse Pakistan’s struggling economy with stabilizing U.S. dollars that will also seek to preserve the nation’s macroeconomic stability while providing it with a framework for partner financing.
“I am pleased to announce that Pakistan has reached a Staff-Level Agreement with the IMF on a nine-month U.S. $3 billion Stand-By Arrangement,” Pakistani Prime Minister Shehbaz Sharif said in a Friday statement. “This arrangement will help strengthen Pakistan’s foreign exchange reserves, enable Pakistan to achieve economic stability and put the country on the path of sustainable economic growth.”
The deal comes as Pakistan’s already struggling economy is confronted by the impacts of last year’s catastrophic floods that are still reverberating throughout the nation and soaring prices for goods that have worsened due to Russia’s invasion of Ukraine.
According to an IMF overview of the country published in April, Pakistan’s economy is under “severe stress” with low foreign reserves, a depreciating currency and high inflation — all while its economic activity has continued to fall amid expectations that economic growth will slow and remain “below potential” for the medium-term.
To achieve the deal, Pakistan had to implement a series of fiscal actions, including broadening the tax base and increasing tax collection from undertaxed sectors while reducing spending, the IMF said.
“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, with further buildup of arrears (circular debt) and frequent loadshedding,” IMF staff team led for Pakistan Nathan Porter said in a statement.
“Given these challenges, the new SBA would provide a policy anchor and a framework for financial support from multilateral and bilateral partners in the period ahead.”