(Bloomberg) -- Pakistan sees a way out of its current economic crisis without descending into default, thanks to progress on a stalled International Monetary Fund loan as well as spending cuts, Finance Minister Miftah Ismail said.

“With the commodity super cycle and Russia-Ukraine war, oil prices skyrocketing and gas going as high as ever been in history, Pakistan and other emerging countries have been facing the worst crisis,” he said in a phone interview. “Nonetheless, Pakistan by having an IMF program, by introducing a significant tight budget and depressing demand for imports has weathered the storm.”

He was referring to the nation’s staff level agreement with the Washington-based lender for reviving a $6 billion loan program. Pakistan needs a total $33.5 billion in the year through June 2023, while available financing stands at $35.9 billion for the period, according to a presentation by the State Bank of Pakistan.

“Everything is settled now,” said Ismail. “Pakistan is absolutely going to make each and every payment and each and every bond.”

Pakistan reduced its imports by 35% to $5 billion in July, which will in turn help check the nation’s current-account gap. The spike in domestic energy prices -- by 50% to win the IMF bailout -- will also reduce energy demand and imports that has been a strain on the currency.

The currency lost more than 14% against the dollar in July, ending Friday’s trading at 239.4 per greenback, the biggest monthly slide since Bloomberg started compiling data in 1989. It’s among the worst currency decliners globally for last month. The currency traded almost unchanged on Monday.

Pakistan’s rupee has overshot to the downside temporarily but is expected to appreciate in line with fundamentals over the next few months, the central bank and finance ministry said in a rare joint statement released near midnight on July 31.

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Author: Faseeh Mangi