China saved us from default: Pakistan PM's praise as country clinches IMF bailout

The IMF reached a staff-level pact with Pakistan on $3 billion in short-term financial help, the lender said.

Pakistan prime minister Shehbaz Sharif said that as the country attempted to reach an agreement with International Monetary Fund (IMF) for a bailout amid financial crisis, China was very helpful. “During this period, China saved Pakistan from default,” Pakistan premier said, adding that the IMF talks had ended on a positive note.

Pakistan's prime minister Shehbaz Sharif. (Reuters)

The IMF reached a staff-level pact with Pakistan on $3 billion in short-term financial help, the lender said. The deal is subject to approval by the IMF board in July. It came just hours before Pakistan's current agreement with the IMF expires.

The bridge loan is set to offers much respite to Pakistan as it battles an acute balance of payments crisis and falling foreign exchange reserves. The so-called Stand-by Arrangement (SBA) will enable Pakistan to achieve economic stability, and put the country “on the path of sustainable economic growth, God willing,” Shehbaz Sharif said.

The country's finance minister Ishaq Dar told Reuters that Pakistan will receive formal documents on the deal later from the IMF which he said he would “sign, seal and return by tonight.”

The $3 billion funding, spread over nine months, is higher than expected as it looks set to replace the remaining $2.5 billion from a $6.5 billion Extended Fund Facility longer-term bailout package agreed in 2019.

"This will support near-term policy efforts and replenish gross reserves, with the aim of bringing them to more comfortable levels," the IMF said.

IMF official Nathan Porter earlier said, “Despite the authorities' efforts to reduce imports and the trade deficit, reserves have declined to very low levels. Liquidity conditions in the power sector also remain acute.”