Pakistan and IMF reach tentative agreement to release $1.1 billion from relief fund, IMF announces

ISLAMABAD — Pakistan and the International Monetary Fund have reached a tentative agreement to waive $1.1 billion of a $3 billion bailout package after several days of talks in Islamabad, the IMF announced on Wednesday.

Under the deal, Pakistan will receive the last part of the bailout package approved by the IMF in July to rescue the country from defaulting on its debt payments.

“A staff-level agreement has been reached with the Pakistani authorities,” the IMF said in a statement, noting that approval by the IMF’s executive board “is considered a formality.”

The announcement came after talks between the IMF and new Prime Minister Shehbaz Sharif concluded in Islamabad. Pakistan’s Finance Minister Mohammad Aurangzeb and the head of the IMF mission to Pakistan, Nathan Porter, led the team in the talks, which began last Thursday.

Pakistan last year signed the latest short-term deal to overcome the worst economic crisis in the country’s history, which raised concerns that the South Asian Islamic nation would default on its external debt payments. The $3 billion bailout package was signed by Sharif, who replaced former prime minister Imran Khan following a vote of no confidence in parliament.

Sharif was re-elected prime minister this month following parliamentary elections on February 8.

This latest development comes weeks after Mr. Khan wrote a letter to the IMF asking it to link all negotiations with Islamabad to an audit of the recent elections. Pakistan’s Tehreek-e-Insaf party claims the election was fraudulent. Authorities dismissed the charges as unfounded.

Pakistani authorities criticized Khan for writing the letter, saying it was an attempt to damage the country’s already deteriorating economy. Pakistan narrowly avoided defaulting on foreign payments last summer.

The IMF said in a statement on Wednesday that “Pakistan’s economic and financial position has improved” in recent months. However, “growth is expected to be moderate this year, inflation remains well above target, and continued policy and reform efforts will be challenged.” Pakistan’s deep-rooted economic vulnerabilities need to be addressed amidst ongoing challenges posed by growing domestic and international financing needs and a volatile external environment. ”

The IMF said the Sharif government is committed to continuing the policy efforts initiated under the current relief package “to establish economic and financial stability for the remainder of this year.”

The report said Pakistani authorities are determined to take steps to further improve the country’s economy through widening the tax base and timely implementation of electricity and gas tariff adjustments, while protecting vulnerable groups through the existing progressive tariff structure. said.

The IMF said Pakistan has also expressed interest in receiving fresh relief. Pakistan hopes to seek a new bailout of up to $8 billion when the current one expires this month, it said.