Pakistan and the IMF have finally 'agreed'

Sources said on Thursday that Pakistan and the IMF had reached an agreement following 10 days of "difficult" talks that releases more than a $1 billion loan tranche under the Extended Fund Facility (EFF) that had been suspended for the previous five months.

Prime Minister Shehbaz Sharif and the IMF team met, according to sources with knowledge of the proceedings, and the mission briefed the premier on the agreement.

The sources claim that the prime minister approved the agreement after speaking with Fund officials in Islamabad via video link while doing so from Lahore.

Finance Minister Ishaq Dar had earlier confirmed the development, saying that talks with the IMF were "on track" and that the government would deliver "positive news" on the topic today.

The State Bank of Pakistan's (SBP) $2.91 billion in foreign currency reserves, which are only enough to cover imports for 0.58 months, are what keep the country's $350 billion economy afloat.

The $6 billion bailout contract was signed by former prime minister Imran Khan in 2019, but it was repeatedly postponed because his government broke its promises to collect taxes and uphold subsidy agreements while running a significant budget deficit.

The current coalition government restarted the programme, and as a result of the seventh and eighth Extended Fund Facility reviews, it got about $1.17 billion in August (EFF).

The programme ran into another snag when the ninth evaluation was due in September because the authorities broke their promises to the lender and carried out a number of fiscal actions that were against the rules.

Finally, as the nation's foreign exchange reserves shrank to dangerously low levels, the administration was forced to accept the harsh IMF recommendation in order to avoid default, which could have resulted in a situation similar to Sri Lanka's, where inflation was rampant and the country was at risk of destabilising inflation.

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