The International Monetary Fund on Wednesday approved a much-awaited US$3 billion bailout for Pakistan, the global lender said, a move that's likely to save the impoverished Islamic nation from defaulting on its debt repayments.
The IMF said its executive board approved an agreement to release the funds over a nine-month period to support Pakistan's economic stabilization program.
The announcement comes less than two weeks after Pakistan and the IMF agreed to the nine-month plan following a series of meetings with Prime Minister Shehbaz Sharif, Finance Minister Ishaq Dar and other officials.
"The arrangement comes at a challenging economic juncture for Pakistan. A difficult external environment, devastating floods, and policy missteps have led to large fiscal and external deficits, rising inflation, and eroded reserve buffers" in the fiscal year 2023, the IMF said in a statement.
Sharif quickly welcomed the IMF decision, saying it was a amajor step forward in the government's efforts to stabilize the economy and achieve macroeconomic stability.
"It bolsters Pakistan's economic position to overcome immediate to medium-term economic challenges, giving the next government the fiscal space to chart the way forward," he said in a tweet. "This milestone, which was achieved against the heaviest of odds & against seemingly impossible deadline, could not have been possible without excellent team effort."
The bailout had been on hold since December when the IMF refused to release a critical US$1.1 billion part of the loan because of the country's lack of compliance with a 2019 agreement signed between the IMF and former Prime Minister Imran Khan.
A breakthrough was announced recently after Sharif met with IMF head Kristalina Georgieva in Paris at the Summit for a New Global Financing Pact to discuss the revival of the US$6 billion bailout package amid shrinking foreign exchange reserves and increasing inflation, which resulted in an increase in food costs.
Sharif has been trying to overcome the economic crisis since he came into power after Khan was ousted in a no-confidence vote in parliament in April 2022. Pakistan's economy witnessed a major shock last summer when devastating floods killed 1,739 people, destroyed two million homes and caused US$30 billion in damage.
"Things are now moving in the right direction," said Dar, the finance minister Wednesday.
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