The International Monetary Fund and Pakistan has reached a staff-level agreement on the South Asian nation's loan program, a key step toward unlocking $1.2 billion in funding, the fund said on Friday.

The agreement, which requires IMF board approval, would give Pakistan access to $1 billion under the Extended Fund Facility and $210 million under the Resilience and Sustainability Facility, bringing disbursements under the ongoing program to $4.5 billion.

Under the $7 billion program, the Washington-based lender is urging Islamabad's policymakers to keep monetary policy tight and data-dependent to anchor inflation expectations and strengthen external buffers.

Pakistan's central bank kept its key policy rate unchanged at 10.5% this month, pausing its rate cuts as rising global energy prices and regional tensions pose new inflation risks for the import-dependent economy.