Pakistan secured initial approval from the International Monetary Fund for the release of the next loan tranche from a $3 billion bailout program.

The Washington-based lender announced Wednesday that it reached a staff-level agreement to give the nation access to a payout of roughly $700 million — subject to approval from the IMF’s executive board.

IMF financing is critical for Pakistan to avoid defaulting on debt as the government steps up efforts to fix imbalances in the economy, including raising gas prices and cracking down on the illegal dollar trade. While a nascent recovery is underway, the nation remains susceptible to “significant external risks,” said an IMF team led by Nathan Porter.

The IMF program has stoked optimism among investors over Pakistan’s fiscal recovery, spurring a more than 50% return in its dollar bonds this year. Its benchmark equity gauge, the KSE-100 Index, is one of the best performers globally since the IMF deal in July.

The announcement came after local markets closed Wednesday.

There are still risks ahead. While the rupee has rebounded from a record low reached in early September, inflation remains elevated and the government is dependent on external financing from creditors, including countries in the Middle East.

Goldman Sachs Group Inc. warned in October the strength of Pakistan’s rupee will be short-lived, given financing risks and as the election approaches.

(Corrects bond market return in 4th paragraph.)