The International Monetary Fund [IMF] has reached a staff-level pact with Pakistan on a $3 billion stand-by arrangement, the lender said, a decision long awaited by the South Asian nation which is teetering on the brink of default.

Thursday's deal, subject to approval by the IMF board in July, comes after an eight-month delay and offers some respite to Pakistan, which is battling an acute balance of payments crisis and falling foreign exchange reserves.

The $3 billion funding, spread over nine months, is higher than expected for Pakistan. The country was awaiting the release of the remaining $2.5 billion from a $6.5 billion bailout package agreed in 2019, which expired on Friday.

The new stand-by arrangement builds on the 2019 programme, IMF official Nathan Porter said in a statement on Thursday, adding that Pakistan's economy had faced several challenges in recent times, including devastating floods last year and commodity price hikes following the war in Ukraine.

"Despite the authorities' efforts to reduce imports and the trade deficit, reserves have decl ined to very low levels. Liquidity conditions in the power sector also remain acute," Porter said in a statement.

"Given these challenges, the new arrangement would provide a policy anchor and a framework for financial support from multilateral and bilateral partners in the period ahead."