Islamabad, Jul 13 (IANS): The International Monetary Fund (IMF) announced that its Executive Board has approved a  critical $3 billion bailout programme for Pakistan, out of which $1.2 billion will be immediately disbursed to help the cash-strapped nation.

The global lender's announcement on Wednesday came just weeks after the IMF and Pakistan had reached a Standby Arrangement on June 29 to ease the country’s financial crisis, reports Dawn news.

In a statement issued late Wednesday night, the IMF said: “The Executive Board of the IMF approved a nine-month Stand-By Arrangement (SBA) for Pakistan for an amount of about $3 billion, or 111 per cent of quota, to support the authorities economic stabilisation programme.

“A difficult external environment, devastating floods and policy missteps have led to large fiscal and external deficits, rising inflation and eroded reserve buffers in FY23.”

In response to the development, Prime Minister Shehbaz Sharif said the bailout was a major step forward in efforts to stabilise the economy, the BBC reported.

"It bolsters Pakistan's economic position to overcome immediate to medium-term economic challenges, giving next government the fiscal space to chart the way forward," he said.

Earlier this week, Pakistan also received $2 billion in funding from Saudi Arabia and another $1 billion from the United Arab Emirates.

The IMF deal came after eight months of tough negotiations over how to deal with serious long-term issues with Pakistan's ailing economy.

The crisis-hit country had been on the brink of being unable to meet debt repayments to creditors.

Much of the country was hit by devastating floods last year, which added to other major problems faced by the country, including high inflation and economic mismanagement by successive governments.

The cost of living has been soaring in Pakistan, reports the BBC.

The official annual rate of inflation currently stands at almost 30 per cent.

Last month, the State Bank of Pakistan raised its main interest rate to a record high of 22 per cent as it struggled to curb rising prices.

This week's bailout is the latest in a long line of support Pakistan has received from the IMF.

It has taken more than 20 loans from the international lender since 1958.