ISLAMABAD (AP) — The International Monetary Fund said Thursday it had reached a preliminary agreement with Pakistan to revive a $6 billion bailout package for this impoverished Islamic nation, which has been facing a serious economic crisis since last year.
The accord was signed by Pakistan and IMF in 2019 The release of the slightly more than $1 billion tranche was held up since early this year. That’s when the IMF expressed concern about Pakistan’s compliance with the conditions of the bailout under former Prime Minister Imran Khan. He was ousted by the parliament in a vote of no confidence.
Under newly elected Prime Minister Shahbaz Sharif, the government has been in talks with the IMF since May, to avoid a default like Sri Lanka’s.
Continue reading: Organic Farming: The Crisis in Sri Lanka Reveals Debate
“The Agreement with the Fund has set the stage to bring country out of economic difficulties,” Sharif wrote on Twitter.
In recent weeks, Pakistan’s government imposed additional taxes and slashed subsidies on fuel, electricity and natural gas to meet IMF’s conditions. The government was unpopular but Sharif claims that the necessary actions were needed.
In a statement Thursday, the fund said it has “reached a staff-level agreement (SLA) with the Pakistan authorities.” It added that the deal is “subject to approval by the IMF’s Executive Board.”
The Pakistani government will receive an important installment in the amount of $1.17 billion.
According to the statement, the IMF will also raise the value of the bailout from $6 billion to $7 billion subject to approval from the IMF’s executive board, which is usually considered a formality.
Miftah Ismail (Finance Minister) blamed Khan in creating Pakistan’s Sri Lanka-like environment. Ismail has said Khan deliberately violated IMF’s conditions to remain popular.
Analysts say the revival of the IMF’s bailout will help the government overcome the economic crisis because the release of installment of loans from the fund will encourage other international financial institutions to engage with Pakistan.
Authorities say Sharif’s government also approached Washington for help reviving the IMF’s bailout. Khan has repeatedly claimed that his government was overthrown by a U.S. plot since Khan’s removal, which Washington strongly denies.
Here are more must-read stories from TIME