WASHINGTON: The International Monetary Fund on Friday said it had approved an additional 3.2 billion dollar loan to Pakistan to help the country weather the global economic crisis.

The IMF said the extra funds for the loan program to Pakistan would ‘help the country address increased balance of payment needs’ and increase the total loan to 11.3 billion dollars.

The IMF executive board also approved an extension of the loan to the end of 2010, an additional three months, and the payment of a third instalment of the loan of 1.2 billion dollars, the multilateral institution said in a statement.

Four billion dollars had already been disbursed, as part of a program to help Pakistan weather the global crisis.

The board decisions were made after IMF completed its second review of its loan, a so-called Stand-By Arrangement, originally approved last November.

The country approached the IMF last year for a rescue package as it grappled with a 30-year high inflation rate and fast-depleting reserves that were barely enough to cover nine weeks of import bills.

‘The macroeconomic outlook for 2009/10 remains difficult, and the external position is subject to considerable downside risks,’ said Murilo Portugal, IMF deputy managing director, in the statement.

The extra IMF aid ‘will help mitigate these risks and enable the implementation of the government’s fiscal program; however, this financing is temporary and should be used as a bridge until the revenue reforms bear fruit.’ The board also agreed that part of the additional funding ‘could be used to finance priority spending until the disbursements of donor support pledged for 2009-2010 are received.’ The IMF approved Pakistan’s request for waivers for failing to meet certain criteria, including a budget deficit that is 0.9 percent of economic output and continued weakness in banking supervision and tax policy.

‘Pakistan’s economy has continued to stabilize,’ Portugal said.

He welcomed Pakistan’s progress in reforms in the financial sector and the foreign exchange market and in strengthening the social safety net.

‘These achievements are appreciable, considering the security developments that resulted among others in the large number of internally displaced persons, the global economic recession, and the difficult domestic political environment.’—AFP