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IMF reaches $3 billion preliminary agreement with Pakistan

<i>Faisal Mahmood/Reuters</i><br/>Pakistan's Finance Minister Ishaq Dar is seen after a meeting in Islamabad on September 26
Faisal Mahmood/Reuters
Pakistan's Finance Minister Ishaq Dar is seen after a meeting in Islamabad on September 26

By Rhea Mogul, CNN

(CNN) — Pakistan has reached a preliminary deal with the International Monetary Fund (IMF) worth about $3 billion that could help stabilize its flailing economy and lift the South Asian nation out of a crisis that has pushed millions to the brink.

The staff-level agreement is subject to approval by the IMF’s executive board, which is expected to consider the request by mid-July, it said in a Thursday statement.

The deal, which had been stalled for months, gives the country of 220 million much needed access to US dollar funding, enables additional financing from creditors and reduces the risk of default, after growth stalled and inflation soared over the past year.

“The new Stand-by Arrangement (SBA) would provide a policy anchor and a framework for financial support from multilateral and bilateral partners in the period ahead,” the IMF said.

It comes after Pakistan experienced catastrophic floods last year, further compounding the economic misery of millions, pushing families into poverty and leaving many unable to afford essentials such as food, fuel and medicines.

Efforts to secure the loan were further complicated by political turmoil that engulfed much of the nation earlier this year, after former Prime Minister Imran Khan was arrested on corruption charges, sparking deadly protests.

Khan was dramatically ousted from power in a no-confidence vote last year, after numerous accusations of bad governance, including economic mismanagement.

The crushing poverty has driven many to flee the nation. Widespread hunger and rising prices have caused stress, anxiety and despair. In April, during Islam’s holy month of Ramadan, hundreds of people lined up on the streets for a single bag of free flour, leading to deadly stampedes and chaos.

And the stress hasn’t just affected the poor. Some middle class citizens were forced to resort to handouts as essential goods became unaffordable.

Pakistani authorities have taken steps ahead of the bailout including raising taxes and cutting spending.

The country has had a rocky history with the IMF. Its current loan program started in 2019, but has been stalled repeatedly as Islamabad failed to meet some of the fund’s requirements.

Experts had warned that without funds from the deal, Pakistan was at risk of default due to its dwindling foreign exchange reserves.

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