Pakistan has reached a staff-level agreement with the International Monetary Fund (IMF), which will revive a suspended funding programme and release $1.17 billion in loan disbursements.

The IMF will also consider an extension of its Extended Fund Facility (EFF) to end-June 2023, it said in a statement on Wednesday. The agreement, if approved by the IMF board, will make available additional funds, taking Pakistan's total access under the programme to about $7 billion, it said.

"Pakistan is at a challenging economic juncture," Nathan Porter, who headed the IMF team, said in the statement.

Economic overheating has led to large fiscal and external deficits in FY22, contributed to rising inflation, and eroded reserve buffers, he said.

IMF had agreed to an EEF package of $6 billion in 2019 for a period of 39 months. So far only half of the promised money has been reimbursed, as Pakistan struggled to meet targets, Dawn newspaper reported.

In June, Pakistan unveiled a $47 billion budget for 2022-23 with higher taxes for the rich and plans to privatise government assets, in moves to smoothen the way for the IMF loan.

Wednesday’s agreement comes with policy priorities for the government that includes:

  • Steadfast implementation of the fiscal 2023 budget
  • Resuming power sector reforms
  • Proactive monetary policies to slow inflation to 5%-7% over the medium term
  • Greater exchange rate flexibility to rebuild reserves
  • Reducing poverty levels, strengthening social safety, and improving governance

(Reporting by Brinda Darasha; editing by Seban Scaria)