IMF strikes deal with Pakistan to revive $6 billion bailout

ISLAMABAD (AP) — The International Monetary Fund said Thursday it had reached a preliminary agreement with Pakistan to reinvigorate a $6 billion bailout for the impoverished Islamic nation, which has been facing a severe economic crisis since Last year.

Pakistan and the IMF originally signed the deal in 2019. But the release of a tranche of just over $1 billion had been on hold since the start of this year. It was then that the IMF became concerned about Pakistan’s compliance with bailout conditions under former Prime Minister Imran Khan. Parliament ousted him with a vote of no confidence in April.

Under new 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 paved the way to lift the country out of economic difficulties,” Sharif wrote on Twitter.

In recent weeks, the Pakistani government has imposed additional taxes and reduced subsidies on fuel, electricity and natural gas to meet IMF conditions. This made the government very unpopular, but Sharif says the actions were necessary.

In a statement on Thursday, the fund said it had “reached a Staff Level Agreement (SLA) with the Pakistani authorities”. He added that the deal is “subject to IMF Executive Board approval.”

He said Pakistan would be eligible to receive a critical payout of around $1.17 billion.

According to the statement, the IMF will also increase the value of the bailout from $6 billion to $7 billion subject to IMF board approval, which is generally seen as a formality.

Finance Minister Miftah Ismail accused Khan of creating a Sri Lanka-like situation in Pakistan. Ismail said Khan deliberately violated IMF conditions to remain popular.

Analysts say the stimulus from the IMF bailout will help the government weather the economic crisis, as the release of loan disbursements from the fund will encourage other international financial institutions to engage with Pakistan.

Authorities say Sharif’s government has also approached Washington for help in reviving the IMF bailout. Since his impeachment, Khan has repeatedly claimed that his government was overthrown by a US plot, a charge Washington denies.

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