The International Monetary Fund (IMF) has reached an agreement with Pakistani authorities on a nine-month stand-by arrangement worth $3 billion. This announcement brings relief to the country, which has been on the brink of a catastrophic default. The deal is expected to unlock additional funds from the World Bank, Asian Development Bank, and other partners like Saudi Arabia, the UAE, and China. The agreement provides breathing space for Pakistan during the interim government and upcoming elections, allowing the next government time to negotiate a longer-term program with structural reforms to address underlying weaknesses in the economy. However, it is worth noting that violating commitments to the IMF has not benefited the country in the past. Pakistani bonds surged following the news, indicating increased investor confidence. The government’s task now is to obtain board approval for the agreement, secure the associated funds, rebuild foreign exchange reserves, and leave a stable balance of payments position for the incoming government. Success in these milestones will redeem the year of economic uncertainty.
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