PAK - IMF approves $1.1B bailout for Pakistan with country underwater

Trouble is brewing in Pakistan, though the nation has been able to secure some help from the International Money Fund. The worst monsoon rains in decades have flooded the country, with nearly a third of Pakistan underwater, countless homes washed away and crucial farmland destroyed. The flooding has killed more than 1,000 people, and affected more than 33M - or one in seven Pakistanis - according to the National Disaster Management Authority.

Bigger picture: The natural disaster has weighed on Pakistan's economic outlook, which is already suffering from severe inflation and a political crisis. Skyrocketing prices for food and fuel saw inflation reach 45% last week, while the rupee has hit record lows against the dollar and forex reserves have eroded. Adding to the instability, Prime Minister Shehbaz Sharif recently took over from arch-rival Imran Khan, who was ousted in April, though fresh elections must be held by the second half of next year.

The latest IMF program, one of a dozen since the 1980s, had stalled multiple times under the Khan government, which opposed unpopular loan conditions like austerity measures. However, the Washington-based institution has changed its stance in recent months, with Sharif's government reversing energy subsidies and imposing fresh taxes. A disbursement of $1.1B was doled out on Monday, while the nation's bailout package was increased to $6.5B.

Outlook: Many economists have warned that Sri Lanka could have been the first domino to fall in a global economic crisis set to envelop many poorly-managed developing countries. While Pakistan seems to have avoided a default threat, things could come back to bite if it fails to implement corrective policies and reforms that remain essential for economic stability. Other South Asia countries like Bangladesh and Nepal are also struggling, and any missteps could spell trouble across the emerging markets.

ETFs: NYSEARCA: PAK

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