© Reuters. FILE PHOTO: A man walks past the International Monetary Fund (IMF) logo at its headquarters in Washington, U.S., May 10, 2018. REUTERS/Yuri Gripas/File Photo
By Ariba Shahid and Asif Shahzad
ISLAMABAD (Reuters) -Pakistan and the International Monetary Fund on Wednesday reached a staff level agreement which, if approved by its board, will disburse $1.1 billion for the debt-ridden South Asian economy, the global lender said.
The funds are the final tranche of a $3 billion last-gasp rescue package Pakistan had secured last summer, which averted a sovereign debt default. Islamabad is also seeking another long-term bailout.
“The IMF team has reached a staff-level agreement with the Pakistani authorities on the second and final review of Pakistan’s stabilization program,” the IMF said in a statement.
“This agreement is subject to approval by the IMF’s Executive Board,” it added. The agreement expires on April 11.
The deal comes after the IMF mission held five days of talks with Pakistani officials to review the fiscal consolidation benchmarks set for the loan.
Most Pakistan dollar bonds were trading higher on Wednesday after the deal was announced.
The 2027-maturing bond was up 0.25 cents at 83.957 cents on the dollar while the 2025 bond which was up 0.21 cents at 92.023 cents on the dollar.
Pakistan’s Finance Minister Muhammad Aurangzeb had said that Islamabad will seek another long-term bailout. The IMF said Pakistan had expressed interest in a deal, and that it would formulate a medium-term programme if Islamabad applies for one.
The government has not officially stated the size of the additional funding it is seeking through a successor programme, however Bloomberg reported in February that Pakistan planned to seek a new loan of at least $6 billion from the lender.
The debt-ridden economy, which shrank 0.2% last year and is expected to grow around 2% this year, has been under extreme stress with low reserves, a balance of payment crisis, inflation at 23%, policy interest rates at 22% and record depreciation of the local currency.
Ahead of the stand-by arrangement, Pakistan had to meet IMF conditions including revising its budget, and raising interest rates, generating revenues through more taxes and raising the price of electricity and gas, which fuelled inflation.
