ISLAMABAD (AP) - Pakistan and the International Monetary Fund have reached an initial agreement on a bailout of at least $5.3 billion to stave off an economic crisis as the country's foreign reserves dip perilously low, officials said Thursday.
The announcement should help calm fears of financial instability in Pakistan, a nuclear-armed nation of 180 million people that Washington is relying on to combat Islamic militants and negotiate an end to the war in neighboring Afghanistan.
The agreement comes less than six years after Pakistan's last IMF bailout, and the driving need for the money this time around was to repay the institution billions of dollars that Islamabad still owes.
Pakistan's previous government failed to implement many of the requirements of the last loan, including reducing the deficit and improving tax collection. That left the new government, which took over at the beginning of June, with the difficult task of convincing the IMF that this time would be different.
The IMF mission director in Pakistan, Jeffrey Franks, acknowledged Islamabad's checkered history, but said the institution would not punish the country for the failure of its predecessors.
"It is true that some previous programs have not been completely successful," said Franks at a joint news conference with Pakistani Finance Minister Muhammad Ishaq Dar in Islamabad. "But the IMF is in the job of helping countries when they have difficult situations and need help, and we're not going to turn a country down because previous governments did not do what they had promised to do."
The $5.3 billion loan will be disbursed over a three-year period and will have an interest rate of roughly three percent, said Franks. It will be repaid over 10 years after an initial grace period of four years, he said.
The deal has been approved by the Pakistani government and IMF staffers in the country. It still needs to be approved by IMF officials in Washington and the institution's board of directors.