ISLAMABAD (AP) — The International Monetary Fund said Monday that weeks of talks with Pakistan have produced a preliminary agreement toward reviving a $6 billion economic bailout for the Islamic nation.
Pakistan and IMF originally signed the accord in 2019, but the release of a key installment had been on the hold since earlier this year. That’s when the fund expressed reservations about a delay in Pakistan’s compliance with conditions of the bailout.
The IMF statement Monday said that under latest proposal, IMF would disburse about $1 billion to Pakistan, bringing the total disbursement out of the $6 billion bailout to about $3 billion since 2019, according to the statement.
The talks this month yielded an agreement “subject to approval by the Executive Board, following the implementation of prior actions, notably on fiscal and institutional reforms,” the IMF statement said.
Such an approval by IMF’s executive board is considered a formality.
Muzzammil Aslam, a spokesman at Pakistan’s finance ministry, also confirmed the latest development, saying the staff-level agreement was reached between Pakistan and IMF after 45 days of discussion.
In April 2020, the IMF released $1.4 billion to Pakistan, helping it handle an economic crisis amid a surge in fatalities from the coronavirus. At least 28,663 Pakistanis have died from COVID-19 since last year, while about 1.2 million tested positive from the new virus.
Analysts say the fund wants Pakistan to further reduce the budget deficit, increase tariffs of electricity and petrol, as well as curb money laundering and corruption. The government in recent weeks complied with most of the conditions of IMF, but doing so made Prime Minister Imran Khan highly unpopular among people as inflation and the price of essential food soared.
In its statement Monday, the IMF also praised some measures taken by Pakistan government, saying the country’s new moves could result in 4% growth this year and 4.5% the fiscal year after that.
Officials say the delay in agreement between Pakistan and the IMF was due to uneasy relations between Pakistan and the United States. U.S. President Joe Biden has avoided a call to Khan since he came into power. Khan this year publicly refused to provide bases to Washington for operations in Afghanistan.
The U.S., which exerts major influence over the IMF, has said the fund should not finance the tens of billions of dollars in loans that Pakistan has taken from China as part of Beijing’s worldwide Belt and Road Initiative.