Pakistan: A $3-Billion Standby Agreement from the IMF

After several months of negotiations, Pakistan will receive a 3-billion-dollar loan from the International Monetary Fund under the standby agreement (SBA).

This is the instrument that provides help (loans) in exchange for reforms that could return an unhealthy state back to financial stability. Indeed, Pakistan has been on the brink of default for some time now, and the SBA could help the country obtain financial instruments for recovering the economy from recent external shocks, preserving the macroeconomic stability, and providing the bases for funding 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,” explains IMF in its release. “Even though this is essentially an interim loan, it provides extensive breathing space for Pakistan, which keeps dealing with a major crisis of pay balance and foreign-currency reserves depletion”.

The current crisis is the worst moment in history of independent Pakistan. This dramatic situation was caused by years of poor financial management and by recent events, such as the war in Ukraine and last-year floods that further aggravated the situation.