Yesterday, Mr. Dominique Strauss-Kahn, Managing Director of the IMF, announced that the “IMF staff and the Pakistani authorities have reached an agreement in principle on the key elements of an economic program” to provide $7.6 billion in aid under the terms of a 23-month Stand-By Arrangement. The IMF had previously indicated last month that Pakistan was one of the member countries that had approached the Fund about receiving possible financial assistance.
Mr. Strauss-Kahn, stated that, “[t]he authorities’ program has two main objectives: (i) to restore the confidence of domestic and external investors by addressing macroeconomic imbalances through a tightening of fiscal and monetary policies; and (ii) to protect the poor and preserve social stability through a well-targeted and adequately funded social net.”
The arrangement, which is still subject to approval from the IMF Executive Board under the IMF’s Emergency Financing Mechanism, will provide “a high level of financial support on the order of 500 percent” of Pakistan’s quota in the Fund. The financial package is part of a “broader package that includes financing from other multilateral institutions and regional development banks.”
To date within the context of the international financial crisis, the IMF has committed to providing aid to Iceland, Ukraine and Hungary. Earlier this year the IMF also entered into a $750 million stand-by arrangement with Georgia, in the wake of its conflict with Russia.