Crisis-hit Pakistan signs $3 billion IMF rescue agreement

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Crisis-hit With regard to finance, Pakistan and the International Monetary Fund (IMF) have struck a staff-level agreement worth $3 billion (£2.4 billion).

The agreement was finally reached after an eight-month wait, though the board of the global lender must yet accept it.

Since gaining independence from Britain in 1947, the South Asian country has been experiencing its greatest economic crisis.

Pakistan's central bank increased its main interest rate to a record high of 22% on Monday in an effort to seal the deal.

An international energy crisis and the devastation caused by the floods that struck Pakistan last year have brought the country's economy, which was already in trouble due to years of financial mismanagement, to its breaking point.

According to Nathan Porter, the IMF's mission leader for Pakistan, "the economy has experienced a number of external shocks, such as the devastating floods in 2022 that affected the lives of millions of Pakistanis and a spike in global commodity prices following Russia's war in Ukraine."

"As a result of these shocks as well as some policy missteps... economic growth has stalled," he continued.

Such agreements, once reached at the staff level, are typically approved by the IMF's Executive Board. In the upcoming weeks, the board is anticipated to evaluate the accord.

According to Michael Kugelman of the Wilson Centre think tank in the United States, "this deal gives Pakistan the economic breathing room it so desperately needs."

The issue is whether it may utilise this IMF agreement as

Pakistan suffers from widespread power outages.

Pakistan malls must close early due to the fuel crisis.

"High inflation combined with limited foreign reserves and lacking macroeconomic stability take time and sustained fiscal discipline to overcome," said Katrina Ell, a senior economist at Moody's Analytics.

In May, Pakistan's annual inflation rate nearly broke the previous record.

Higher than anticipated, the $3 billion in financing will be dispersed over nine months.

The final $2.5 billion of a $6.5 billion rescue package agreed upon in 2019 was still owed to Pakistan as of Friday.

Over 230 million people live in the country, which has been working for years to stabilise its economy.

The nation's foreign exchange reserves decreased this year to a level that only covered

Financial markets have also been roiled by deadly riots between Imran Khan's followers and the police in Pakistan.

Mr. Khan was detained in May on suspicion of corruption; this action has subsequently been declared unconstitutional by the nation's Supreme Court.

The Pakistani rupee has lost over 40% of its value versus the US dollar during the past year.

Additionally, more than $9 billion has been donated by international donors to assist Pakistan in recovering from the terrible floods that struck the nation in 2022.

More than $16 billion was expected to be required for catastrophe recovery.