Pakistan and the International Monetary Fund have reached an agreement worth approximately $3 billion. This could help stabilize the economy of the South Asian country, which has been in a state of crisis for years.
In a statement released on Thursday, the IMF executive board will have to approve the agreement at the staff level. It is expected that the board will consider the request in mid-July.
After the growth stagnated and inflation spiked in the last year, the deal gives the 220 million-strong country much needed access US dollar funding. It also allows additional financing by creditors and reduces default risk.
The IMF stated that the new Stand-by Arrangement would serve as a policy anchor, and a framework to receive financial support from both multilateral and bilateral partners over the next few years.
This comes after Pakistan suffered catastrophic floods in the past year. The economic hardship of millions was further compounded, and many families were left unable to pay for essentials like food, fuel, and medicine.
The political turmoil that gripped the country earlier this year after the former prime minister Imran Khan, who was arrested for corruption, sparked deadly protests, further complicated efforts to secure the loan.
Khan was ousted dramatically from power last year in a vote of no confidence, following numerous accusations, including those of economic mismanagement, and bad governance.
Many have fled the country because of poverty. Hunger and rising prices are causing stress, anxiety, and despair. In April, thousands of people lined the streets to get a free bag of flour during Islam's holy Ramadan month, causing chaos and deadly stampedes.
Stress has not only affected the poor. As essentials became too expensive, some middle-class citizens had to rely on handouts.
The Pakistani authorities took steps to prepare for the bailout, including increasing taxes and cutting expenditure.
The IMF has a turbulent history with Pakistan. The current loan program began in 2019 but has repeatedly been delayed as Islamabad did not meet certain requirements of the IMF.
Experts warned that Pakistan's foreign exchange reserves were in danger of dwindling if it did not receive funds from this deal.