Islamabad, Pakistan

In a big respite to the nation's crumbling economy, International Monetary Fund (IMF) has given its approval to a $3 billion bailout programme for Pakistan on Wednesday. IMF executive board said that approximately $1.2 billion will be immediately disbursed to provide immediate relief and the remaining instalments will be provided later to Pakistan, Dawn reported. 

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The amount approved, however, is higher-than-expected funding for Pakistan. 

The approved bailout amount of $3 billion, to be spread over a period of nine months, comes when the nation was eagerly anticipating the disbursement of the remaining $2.5 billion from a bailout package of $6.5 billion that was initially agreed upon in 2019 but expired in June.

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The latest development also comes after June 29 Standby Arrangement reached between Pakistan and IMF to address the financial crisis faced by the country. 

“The Executive Board of the International Monetary Fund approved a 9-month Stand-By Arrangement (SBA) for Pakistan for an amount of SDR2,250 million (about $3 billion, or 111 per cent of quota) to support the authorities economic stabilisation programme,” IMF said in a statement.

Challenging economic circumstances

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The IMF pointed out that Pakistan is facing a challenging economic situation. Speaking of a combination of adverse conditions, IMF said, “A difficult external environment, devastating floods and policy missteps have led to large fiscal and external deficits, rising inflation and eroded reserve buffers in FY23." 

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Notably, the approval from the IMF comes after Saudi Arabia and the United Arab Emirates (UAE) made substantial deposits of $2 billion and $1 billion, respectively, into the State Bank of Pakistan. 

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These contributions have helped boost Pakistan's foreign exchange reserves.

Shehbaz Sharif welcomes IMF bailout 

Pakistan Prime Minister Shehbaz Sharif said the endorsement of the $3 billion agreement marked a "major step forward" in the government's endeavours to stabilise the economy. “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 stated, adding, “I would commend Finance Minister Ishaq Dar and his team at the Ministry of Finance for their hard work." 

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