KARACHI, March 26 — International Monetary Fund staff reached a deal with Pakistan for a new US$1.3 billion (RM5.75 billion) arrangement and also agreed on the first review of the ongoing 37-month bailout programme, the IMF said yesterday.

Pending board approval, Pakistan can unlock the US$1.3 billion under a new climate resilience loan programme spanning 28 months.

It will also free US$1 billion for the South Asian nation under its US$7 billion bailout programme, which would bring those disbursements to US$2 billion.

The programme, secured mid-year in 2024, has played a key role in stabilizing Pakistan’s economy and the government has said the country is on course for a long-term recovery.

“Over the past 18 months, Pakistan has made significant progress in restoring macroeconomic stability and rebuilding confidence despite a challenging global environment,” the IMF said in a statement.

“Upon approval (by the IMF board), Pakistan will have access to about US$1 billion under the EFF, bringing total disbursements under the programme to about US$2 billion,” the IMF said.

Pakistan’s inflation is likely to remain steady in March, in the 1 per cent to 1.5 per cent range, the country’s finance ministry said in its monthly economic outlook, after slowing to its lowest level in almost a decade the previous month.

Inflation in Pakistan has been declining for several months, hitting 1.5 per cent in February, after it soared to around 40 per cent in May 2023.

Pakistan says its US$350 billion economy has stabilized under a US$7 billion IMF bailout that had helped it stave off a default threat.

“While economic growth remains moderate, inflation has declined to its lowest level since 2015, financial conditions have improved, sovereign spreads have narrowed significantly, and external balances are stronger,” the IMF said about Pakistan.

Islamabad had been awaiting the IMF agreement on the first review of the bailout and disbursement of US$1 billion ahead of the country’s annual budget, usually presented in June.

The IMF statement also noted what it called elevated downside risks such as geopolitical shocks to commodity prices, tightening global financial conditions, or rising protectionism.

It said such risks could undermine Pakistan’s “hard-won macroeconomic stability.” — Reuters