ISLAMABAD: The International Monetary Fund's (IMF) board approved a $3 billion, nine-month bailout package for Pakistan on Wednesday, the international lender said. 

Cash-starved Pakistan and the IMF reached a stand-by arrangement (SBA) last month for the bailout package. The development comes as a sigh of relief for the South Asian country, which has been reeling from a balance of payments crisis, as financial experts feared Pakistan would default on its obligations. 

“Today, the Executive Board of the International Monetary Fund (IMF) approved a 9-month Stand-By Arrangement (SBA) for Pakistan for an amount of SDR 2,250 million (about $3 billion or 111 percent of quota) to support the authorities' economic stabilization program," the lender wrote on its website. 

The fund said its immediate disbursement to Pakistan would be SDR 894 million or about $1.2 billion, adding that the remaining amount would be phased over the program's duration, subject to quarterly reviews. 

"Pakistan's new SBA-supported program will provide a policy anchor for addressing domestic and external imbalances and a framework for financial support from multilateral bilateral partners," the IMF stated. 

The lender said the SBA arrangement will focus on the implementation of Pakistan's FY24 budget to facilitate the South Asian country's needed fiscal adjustment and support debt sustainability while supporting critical social spending. 

It said the program would also focus on a "return to market-determined exchange rate" and proper foreign exchange market functioning to absorb external shocks and foreign exchange shortages. 

The IMF said its program will also focus on a tight monetary policy that brings about disinflation and further progress on structural reforms with a particular focus on energy sector viability, governance of state-owned enterprises, and climate resilience. 

On Wednesday, Pakistan said the UAE had deposited $1 billion in its central bank, a day after Saudi Arabia deposited $2 billion and hours before the IMF's formal nod came through.  Debt rollovers from China, Pakistan’s largest creditor, will also be key in securing the external financing the IMF has tasked Pakistan with achieving.

Islamabad took 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 rupees ($1.34 billion) in new taxation to meet the IMF’s fiscal adjustments.