The International Monetary Fund (IMF) and Pakistan on Tuesday reached a staff-level agreement over reforms that will lead to the release of around $500 million in funds, the IMF and the country's finance ministry said.

The package strikes an appropriate balance between supporting the economy, ensuring debt sustainability and advancing structural reform, the fund said in a statement.

"Pending approval of the Executive Board, the reviews' completion would release around US$500 million," the IMF said.

Finance Minister Dr Abdul Hafeez Shaikh also confirmed the agreement on Twitter, saying that "overcoming the challenges created by the pandemic has required concerted effort".

"This is a good development for Pakistan," he added.

In a statement, IMF said that Pakistan's progress under the Extended Fund Facility (EFF) had been temporarily disrupted by the shock of the pandemic.

"The Pakistani authorities remain committed to ambitious policy actions and structural reforms to strengthen economic resilience, advance sustainable growth, and achieve the EFF’s medium-term objectives," the statement noted.

Reacting to the development, Minister for Industries and Production Hammad Azhar said that Pakistan's economy has "successfully gone through a stabilisation phase, fared better than most countries during the Covid-19 shock and is now entering the growth period".

The agreement with the IMF would "provide certainty and buffers to the economy", he said.

Last month, State Bank of Pakistan Governor Dr Reza Baqir had said that Pakistan was in talks with the IMF to put the fiscal support programme back on track.

"We hope to have good news for the market and the world that we are putting the programme back on track," Baqir had said.

Last year, staff from the IMF and Pakistani authorities reached an agreement to pave the way for a disbursement of $450m in IMF funds pending approval from the global lender's executive board.

Pakistan and the IMF have been working to implement IMF-supported economic reforms, in particular tax collection, aimed at stabilising the economy and shoring up a yawning fiscal deficit.

Though the bailout programme was still pending, Pakistan received $1.4 billion in emergency financing from the IMF to allow it to fund targeted and temporary spending increases aimed at containing the pandemic and mitigating its economic impact.

Authorities are counting on the IMF bailout package to bolster Pakistan's fiscal position and increase global confidence in its economy.

Pakistan entered a $6 billion IMF programme in 2019.