ISLAMABAD: The International Monetary Fund (IMF) reached a staff-level pact with Pakistan on a $3-billion stand-by agreement, said the lender, a decision long awaited by the South Asian nation, which is teetering on the brink of default.

The deal, subject to approval by the IMF board, comes after an eight-month delay and offers some respite to Pakistan, which is battling an acute balance of payments crisis and falling foreign exchange reserves.

“The new standby agreement builds on the authorities’ efforts under Pakistan’s 2019 Extended Fund Facility-supported program which expires end-June,” said IMF official Nathan Porter.

The Fund has released the details of the agreement online.

It said:

• The IMF staff and the Pakistani authorities have reached a staff-level agreement on policies to be supported by a Stand-By Arrangement (SBA). The staff-level agreement is subject to approval by the IMF Executive Board, with its consideration expected by mid-July.

• The new SBA will support the authorities’ immediate efforts to stabilize the economy from recent external shocks, preserve macroeconomic stability and provide a framework for financing from multilateral and bilateral partners. The new SBA will also create space for social and development spending through improved domestic revenue mobilization and careful spending execution to help address the needs of the Pakistani people.

• Steadfast policy implementation is key for Pakistan to overcome its current challenges, including through greater fiscal discipline, a market determined exchange rate to absorb external pressures, and further progress on reforms, particularly in the energy sector, to promote climate resilience, and to help improve the business climate.

The agreement was reached after an IMF team led by Mr. Nathan Porter held “in person and virtual meetings with the Pakistani Authorities to discuss a new financing engagement for Pakistan under an IMF Stand-by Arrangement (SBA),” the Fund said.

“I am pleased to announce that the IMF team has reached a staff-level agreement with the Pakistani authorities on a nine-month Stand-by Arrangement (SBA) in the amount of SDR2,250 million (about $3 billion or 111 percent of Pakistan’s IMF quota),” said Porter.

Earlier, Finance Minister Ishaq Dar told news agency Reuters that a staff-level agreement for a crucial bailout deal with the International Monetary Fund was “very close” and expected in the next 24 hours.

Islamabad was racing against time to unlock at least $1.1 billion under the lender’s ninth review of a $6.5-billion Extended Fund Facility agreed in 2019. The programme was set to expire on Friday.

“We are very close to signing a staff-level agreement with the IMF,” Finance Minister Ishaq Dar said late on Thursday.

“I think it should come sometime tonight or maximum within 24 hours … We have finalised everything.”

A source familiar with talks told Reuters that Pakistan and the IMF were also in discussions for the release of the full $2.5 billion pending under the IMF programme.

The source said the staff-level agreement was set to initially unlock around $1.1 billion and then be followed by a “standby agreement” which could release the rest after the programme finishes on Saturday.

A representative for the IMF in Pakistan did not immediately respond to a request for comment.

Read: Why has the IMF been so strict on Pakistan this time?

The funds from the IMF would offer some respite to Pakistan which is battling an acute balance of payments crisis and falling foreign exchange reserves.

A total of $4 billion have already been released. Dar had earlier told the media the government was working on a mechanism to try to unlock the full $2.5 billion pending under the IMF programme.

It was unclear what portion of the funds would be released in the announcement he expected in the next 24 hours.