As part of the agreement, friendly nations will also contribute external funding totaling $2 billion from Saudi Arabia and $1 billion from the United Arab Emirates (UAE).
Ishaq Dar, the finance minister, expressed optimism that the IMF would sign the agreement as soon as it was made aware of the commitments made by the two nations.
Before it expires in June, the IMF programme, which is essential for Pakistan to meet its external payment obligations, will distribute a further tranche of $1.4 billion.
The cash-strapped nation will also be able to access additional bilateral and multilateral financings thanks to this funding.
However, since late January, both parties have been engaged in difficult negotiations to come to an understanding on a number of conditions.
The IMF required Pakistan to take steps including ending subsidies in the power, export, and farming sectors, raising energy and fuel prices, and enacting a long-term power surcharge, among other things.
Pakistan has already taken actions like raising its key policy rate to an all-time high of 21%, switching to a market-based exchange rate, securing external financing, and collecting more than Rs170 billion ($613 million) in new taxes.
The nation experienced its highest inflation ever as a result of these policies, which increased in March to over 35% YoY.
After the IMF funding stalled in November over problems with fiscal policy changes, the nation’s foreign exchange reserves shrank to barely cover a month of imports. For Pakistan, it is crucial that the $6.5 billion bailout package that was agreed upon in 2019 resume.
According to Interior Minister Rana Sanaullah, the formal agreement with the IMF will be signed the following week, subject to the lender’s final approval. Speaking to a crowd in Faisalabad, he promised the people that they would receive relief once the agreement was signed.
Pakistan’s financial woes have recently received some relief thanks to neighbouring China, which recently refinanced another $1.3 billion and rolled over $2 billion.
To stabilise its economy and keep its external payment obligations from defaulting, the nation will need ongoing assistance from abroad.
