Islamabad(Pakistan)- The International Monetary Fund said Thursday it had reached a preliminary agreement with Pakistan to revive a $6 billion bailout package for this impoverished, majority Muslim nation struck by a severe economic crisis since last year.
Pakistan and the IMF originally signed the accord in 2019. But the release of a slightly over $1 billion tranche had been on hold since earlier this year. That’s when the IMF expressed concern about Pakistan’s compliance with the bailout conditions under former Prime Minister Imran Khan. The parliament ousted Khan in a no-confidence vote in April.
Under newly elected Prime Minister Shahbaz Sharif, the government has been in talks with the IMF since May to avoid a default like Sri Lanka’s.
“The Agreement with the Fund has set the stage to bring the country out of economic difficulties,” Sharif wrote on Twitter.
In recent weeks, Pakistan’s government imposed additional taxes and slashed fuel, electricity and natural gas subsidies to meet IMF’s conditions. That made the government highly unpopular, but Sharif says the actions were necessary.
In a statement Thursday, the fund said it has “reached a staff-level agreement (SLA) with the Pakistan authorities.” The deal is “subject to approval by the IMF’s Executive Board.”
It said Pakistan would be eligible to receive a critical instalment of about $1.17 billion.
According to the statement, the IMF will also raise the value of the bailout from $6 billion to $7 billion, subject to approval from the IMF’s executive board — usually considered a formality.
Finance Minister Miftah Ismail blamed Khan for creating a Sri Lanka-like situation in Pakistan and claimed the ousted premier had deliberately violated IMF’s conditions to remain popular.
In a video message, Sharif announced he was slashing fuel and diesel prices by up to 15%, a move he said was made possible by the reduction in oil prices on the international market.
Analysts say the revival of the IMF’s bailout will help the government overcome the economic crisis because releasing instalment loans from the fund will encourage other international financial institutions to engage with Pakistan.
Authorities say Sharif’s government also approached Washington for help reviving the IMF bailout. Since his ouster, Khan has repeatedly alleged that his government was toppled under a U.S. plot, a charge Washington denies.
