Crisis-hit Pakistan strikes $3bn funding deal with IMF

Pasar eceran di Karachi, Pakistan

Pakistan, a nation in crisis, and the International Monetary Fund (IMF) have come to terms on a $3 billion (£2 point 4 billion) funding agreement.

After an eight-month delay, the agreement has finally been reached, though the board of the global lender must still approve it.

The country of South Asia is enduring its worst economic downturn since gaining independence from Britain in 1947.

The main interest rate of Pakistan's central bank was increased to a record high of 22% on Monday in order to help seal the deal.

An international energy crisis and the devastation caused by last year's floods have brought Pakistan's economy, which was already in trouble due to years of financial mismanagement, to the verge of collapse.

The devastating floods in 2022, which affected the lives of millions of Pakistanis, and a spike in global commodity prices following Russia's war in Ukraine were just two examples of the numerous external shocks the economy had to deal with, according to Nathan Porter, head of the IMF's mission in Pakistan.

"As a result of these shocks and some ineffective policy decisions. Growth in the economy has stopped, he continued.

In May, Pakistan's annual inflation rate surpassed its previous high by almost 38%.

The funding amount of $3 billion, which will be dispersed over nine months, is higher than anticipated.

The country was waiting for the release of the final $2.15 billion of a $6.55 billion bailout package that was agreed upon in 2019 but expired on Friday.

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