The International Monetary Fund agreed to revive a $6 billion bailout package for Pakistan after more than a month of discussions, providing a major relief to its struggling economy though the government will need to push through with key reforms. Pakistan and IMF have reached a staff-level agreement for the loan review, the IMF said. The agreement involves the implementation of prior actions, notably on fiscal and institutional reforms, before final approval is given by the IMF’s executive board.

The agreement comes as the South Asian economy grapples with stubborn inflation, due in part to pent-up demand, high global commodity prices and rising imports. Pakistan’s central bank raised its key interest rate by more than expected last week. Pakistan’s rupee rose by 1.2 per cent to 173.16 a dollar at 11:39 a.m. local time. Its dollar bonds also advanced with yield on bond due in 2031 falling 33 basis points, the most since it was issued in April.

“After an agonisingly long delay, Pakistan is finally back on track with its IMF program,” said Nicholas Yap, an analyst at Nomura International (HK) who is overweight on Pakistan’s dollar bonds. “This should help to ease fundamental concerns on the country in light of the pressure on its current account and currency,” he added. Pakistan has been looking to reach an agreement with the IMF for more than a month. It still needs to pass amendments that gives the government less influence over the central bank and raise taxes before the final approval from the IMF.