IMF and Pakistan reach $3 billion stand-by deal

ISLAMABAD

Pakistan could get temporary relief for its ballooning foreign debt with a new stand-by arrangement worth $3 billion announced by the International Monetary Fund (IMF) in Washington on June 30.

The economy has been stricken by a balance-of-payments crisis as it attempts to service crippling external debt, while months of political chaos have scared off potential foreign investment.

Inflation has rocketed, the rupee has reached a record low against the dollar, and the country can no longer afford imports, causing a severe decline in industrial output.

"I am pleased to announce that the IMF team has reached a staff-level agreement with the Pakistani authorities on a nine-month standby arrangement in the amount of SDR 2,250 million [about $3 billion]," said IMF official Nathan Porter in a statement.

The deal will need to be approved by the IMF's executive board and will be considered by mid-July, Porter said.

The figure represents 111 percent of Pakistan's IMF quota.

Pakistan's Finance Minister Ishaq Dar celebrated the new potential deal by tweeting "AlhamdoLilah," meaning "praise be to God."

Years of financial mismanagement have pushed Pakistan's economy to the limit, exacerbated by the COVID pandemic, a global energy crisis since Russia's invasion of Ukraine, and record monsoon floods that submerged a third of the country in 2022.

Pakistan needs billions of dollars in financing to service staggering levels of external debt, and foreign exchange reserves have dwindled to just $3.5 billion, roughly enough for three weeks of imports.

The crisis prompted the government to temporarily impose a months-long broad import ban, stalling multiple industries.

Pakistan failed to meet any economic growth targets for the fiscal year 2022-23, with GDP growth at 0.3 percent, while the country's standing on the global economic rank fell from 24th in 2017 to 47th.