The three-year loan was approved by the IMF's executive board in Washington to "support Pakistan's economic plan, which aims to return sustainable growth to the country’s economy and improve the standards of living," spokesperson Gerry Rice said in a tweet.
The loan will be released in phases in the next 39 months with a condition of a quarterly review of Islamabad's performance by the IMF. The first tranche of the loan - $ 1 billion - has been released immediately, local English daily Dawn reported.
Pakistan will receive $2 billion annually under an extended fund facility (EFF), according to the IMF.
In a tweet, Finance Minister Dr Abdul Hafeez Shaikh also confirmed the development, saying, "Our program supports broad-based growth by reducing imbalances in the economy. Social spending has been strengthened to completely protect vulnerable segments."
The two sides had reached a staff-level agreement on an Extended Fund Arrangement (EFF) for about $6 billion in May this year.
Under the agreement, the government will no longer control the Dollar value against Rupee (local currency). Instead, it will be dealt by the open market.
Also, the government will start withdrawing exemptions offered in various taxes amounting to around Rs 350 billion in the budget for 2019-20, local English daily Pakistan Today reported.
The two sides also agreed that Pakistan would increase the costs of electricity and gas for the consumers in the next budget, the newspaper said.
Grappling with a colossal $18 billion current account deficit, Prime Minister Imran Khan's government had approached the IMF for a bailout package in August last year amid change of his financial team, which failed to contain the mounting current account and budget deficit and decreasing growth rate apart from a sharp devaluation of Rupee against Dollar in last ten months.
The government has recently appointed an IMF employee as Governor of the State Bank of Pakistan - a move viewed as "outsourcing the economy to IMF" by the opposition.
Recently, Saudi Arabia, United Arab Emirates (UAE) have also announced $6 billion each and Qatar $3 billion bailout packages for Pakistan.
Islamabad’s current external debt stands at nearly $100 billion -- the bulk of it borrowed from the World Bank, IMF, Asian Development Bank, Islamic Development Bank, the United States, China, France and other countries.
The South Asian nuclear state has conceded a loss of $100 billion since 2002 after it joined the U.S.-led war against terrorism.