The International Monetary Fund has approved a much-awaited $3 billion bailout for Pakistan, the global lender said, a move that's likely to save the impoverished nation from defaulting on its debt repayments.

The IMF said its executive board approved an agreement to release the funds over a nine-month period to support Pakistan's economic stabilization program.

"The arrangement comes at a challenging economic juncture for Pakistan. A difficult external environment, devastating floods, and policy missteps have led to large fiscal and external deficits, rising inflation, and eroded reserve buffers" in the fiscal year 2023, the IMF said in a statement.

The announcement comes less than two weeks after Pakistan and the IMF agreed to the nine-month plan following a series of meetings with Prime Minister Shehbaz Sharif, Finance Minister Ishaq Dar and other officials.

UAE, Saudi support

Pakistan's state bank coffers were further boosted by a $1 billion deposit from the United Arab Emirates on Wednesday, ahead of a key International Monetary Fund (IMF) board meeting to approve new funding.

"As a time-tested friend & brotherly country, the UAE has always come forward to support Pakistan," Prime Minister Shehbaz Sharif said.

"We deeply acknowledge this kind gesture & consider it critical to our efforts to stabilise the economy."

Finance Minister Ishaq Dar said the UAE deposit would be reflected on the books by Friday.

The deposit comes a day after Saudi Arabia transferred $2 billion to Islamabad, and brings the state's foreign reserves to $7.5 billion - more than double last week's account balance.