ISLAMABAD: The International Monetary Fund’s board will meet today, Wednesday, to take a vote to approve a $3 billion short-term financial package for Pakistan that will give the South Asian economy a much-awaited respite as it teeters on the brink of default.

The IMF said on June 29 it had reached an agreement on the deal with the 220 million nation, which would be subject to approval by its board in July.

The new Stand-by Arrangement (SBA) builds on the authorities’ efforts under Pakistan’s 2019 Extended Fund Facility-supported program which expired end-June.

“The new SBA would provide a policy anchor and a framework for financial support from multilateral and bilateral partners in the period ahead,” the IMF said when it announced the new SBA.

On Tuesday, Pakistan said Saudi Arabia had deposited $2 billion in its central bank, while $1 billion is expected from the UAE. Debt rollovers from China, Pakistan’s largest creditor, will also be key in securing the external financing the IMF has tasked Pakistan with achieving. 

With sky-high inflation and foreign exchange reserves barely enough for a month of imports, analysts say Pakistan’s economic crisis will spiral into a debt default in the absence of the bailout.

Islamabad has taken a slew of measures demanded by the IMF since its mission arrived in Pakistan in February, including revising its 2023-24 budget and a policy rate hike to 22 percent in recent days.

It also got Pakistan to raise more than 385 billion rupee ($1.34 billion) in new taxation to meet the IMF’s fiscal adjustments.

The IMF said the central bank should remain pro-active to reduce inflation and maintain a foreign exchange framework.

The painful adjustments have already fueled all time high inflation of 38 percent year-on-year in May, the highest in Asia.