ISLAMABAD Pakistan and the International Monetary Fund are discussing a $2.5-billion "standby arrangement" for six to nine months, domestic newspapers said on Wednesday, with the current bailout programme set to expire on June 30.

Pakistan rushed through a recent slew of policy adjustments, including a revised budget sought by the IMF and an off-cycle hike in interest rates, hoping to secure the pending funds under the Extended Fund Facility programme (EFF) signed in 2019.

With time running out, Finance Minister Ishaq Dar said on Tuesday the two sides were working on a "mechanism" to ensure that Pakistan got the entire amount and not just the close to $1.1 billion due under the current review.

Dar did not elaborate on what the mechanism was.

The ninth review is in order after recent adjustments but Pakistan is keen to receive the entire undisbursed amount, which is only possible in a new programme, the Express Tribune daily said, quoting highly-placed sources.

It said Prime Minister Shehbaz Sharif discussed signing a new stand-by arrangement (SBA) worth $2.6 billion for a short term of six months with IMF Managing Director Kristalina Georgieva.

The IMF's resident representative Esther Perez and Dar did not respond to a Reuters request for comment.

Pakistan's Dawn newspaper also said an SBA was one option discussed to access pending funds after expiry of the EFF.

The south Asian nation is in dire need of external financing and has allocated $2.5 billion in IMF support in its annual budget, which will also be key to unlock other avenues of funding.

On Tuesday, Prime Minister Shehbaz Sharif said he expected an agreement in a day or two, with the lender saying it was holding talks with the aim of "quickly reaching an agreement on financial support from the IMF".

It did not say if the financing was part of the EFF or a new SBA.

Pakistan's international bonds rallied sharply for a third straight session amid rising hopes of IMF funding.

The gains were most pronounced in shorter-dated issues, with the 2024 bond up more than 3 cents in the dollar to trade just above 60 cents - its highest level since early February and up more than 10 cents since the start of the week, Tradeweb data showed.

Longer-dated maturities gained about 1.5 cent.

(Reporting by Shivam Patel, Gibran Peshimam and Jorgelina do Rosario)