Pakistan's Prime Minister Shehbaz Sharif welcomed the International Monetary Fund's decision to approve a $7 billion funding agreement for the country, his office said on Wednesday.

Islamabad had been working on implementing conditions that Sharif had previously called "strict" from the IMF to complete the 37-month loan programme agreed to in July, which the country hopes will be its last, Reuters reported.

The IMF said the new program will require "sound policies and reforms" to strengthen macroeconomic stability and address structural challenges alongside "continued strong financial support from Pakistan’s development and bilateral partners."

An immediate disbursement of about $1 billion will take place.

Sharif, on the sidelines of the United Nations General Assembly, told Pakistani media this week that Pakistan had fulfilled all of the lender's conditions, with help from China and Saudi Arabia.

"Without their support, this would not have been possible," he said, without elaborating on what assistance Beijing and Riyadh had provided to get the deal over the line.

Rollovers or disbursements of loans from Pakistan's long-time allies, in addition to financing from the IMF, have helped the country meet its external financing needs in the past.

The government had also vowed to increase its tax intake, in line with IMF requirements, despite protests in recent months by retailers and some opposition parties over the new tax scheme and high electricity rates.

Pakistan has been struggling with boom-and-bust economic cycles for decades, leading to 22 IMF bailouts since 1958. Currently the country is the IMF's fifth-largest debtor, owing the Fund $6.28 billion as of July 11, according to the lender's data.

The latest economic crisis has been the most prolonged and has seen Pakistan facing its highest-ever inflation, pushing the country to the brink of a sovereign default last summer before an IMF bailout.

Inflation has since eased and credit ratings agency Moody's has upgraded Pakistan's local and foreign currency issuer and senior unsecured debt ratings to 'Caa2' from 'Caa3', citing improving macroeconomic conditions and moderately better government liquidity and external positions.

Russia has established a weapons programme in China to develop and produce long-range attack drones for use in the war against Ukraine, according to two sources from a European intelligence agency and documents reviewed by Reuters.

IEMZ Kupol, a subsidiary of Russian state-owned arms company Almaz-Antey, has developed and flight-tested a new drone model called Garpiya-3 (G3) in China with the help of local specialists, according to one of the documents, a report that Kupol sent to the Russian defence ministry earlier this year outlining its work.

Kupol told the defence ministry in a subsequent update that it was able to produce drones including the G3 at scale at a factory in China so the weapons could be deployed in the "special military operation" in Ukraine, the term Moscow uses for the war.

Kupol, Almaz-Antey and the Russian defence ministry did not respond to requests for comment for this article. China's foreign ministry told Reuters it was not aware of such a project, adding that Beijing had strict control measures on the export of drones, or unmanned aerial vehicles (UAVs).

Fabian Hinz, a research fellow at the International Institute for Strategic Studies, a London-based defence think-tank, said the delivery of UAVs from China to Russia, if confirmed, would be a significant development.

"If you look at what China is known to have delivered so far, it was mostly dual-use goods - it was components, sub-components, that could be used in weapon systems," he told Reuters. "This is what has been reported so far. But what we haven't really seen, at least in the open source, are documented transfers of whole weapon systems."

Still, Samuel Bendett, an adjunct senior fellow at the Center for a New American Security, a Washington-based think tank, said Beijing would be hesitant to open itself up to international sanctions for helping Moscow's war machine. He said more information was needed to establish that China was playing host to production of Russian military drones.

The White House National Security Council said it was deeply concerned by the Reuters report of the drones programme, which it said appeared to be an instance of a Chinese company providing lethal assistance to a U.S.-sanctioned Russian firm.

The White House has not seen anything to suggest the Chinese government was aware of the transactions involved, but China has a responsibility to ensure companies aren't providing lethal aid to Russia for use by its military, a spokesperson added.

Asked about the Reuters report, a NATO spokesperson said via email: "These reports are deeply concerning and Allies are consulting on this matter."

"The Chinese government has a responsibility to ensure its companies are not providing lethal assistance to Russia," added the spokesperson, Farah Dakhlallah. "China cannot continue to fuel the largest conflict in Europe since the Second World War without this impacting its interests and reputation."

Britain's Foreign Office called on China to stop providing diplomatic and material support to Russia's war effort.

"We are extremely concerned by reports that Russia is producing military drones in China," a spokesperson said.

"This adds to a growing body of open-source evidence that Chinese companies are enabling Russia’s illegal invasion of Ukraine. The supply of weapons would be a direct contradiction to statements from China that it would not provide weapons to relevant parties of the conflict."

The G3 can travel about 2,000 km (1,200 miles) with a payload of 50 kg (110 pounds), according to the reports to the Russian defence ministry from Kupol, which was placed under U.S. sanctions in December 2023. Samples of the G3 and some other drone models made in China have been delivered to Kupol in Russia for further testing, again with the involvement of Chinese experts, they said.

The documents do not identify the Chinese drone specialists involved in the project that it outlined, and Reuters was unable to determine their identity, Reuters reported.

Kupol has taken delivery of seven military drones made in China, including two G3s, at its headquarters in the Russian city of Izhevsk, according to the two separate documents reviewed by Reuters, which are invoices sent to Kupol in the summer by a Russian firm that the two European intelligence sources said serves as an intermediary with Chinese suppliers. The invoices, one of which requests payment in Chinese yuan, do not specify delivery dates or identify the suppliers in China.

The two intelligence sources said the delivery of the sample drones to Kupol was the first concrete evidence their agency had found of whole UAVs manufactured in China being delivered to Russia since the Ukraine war began in February 2022.

They asked that neither they nor their organisation be identified due to the sensitivity of the information. They also requested certain details related to the documents be withheld, including their precise dates.

The sources showed Reuters five documents in all, including two Kupol reports to the ministry in the first half of the year and the two invoices, to support their claims of the existence of a Russian project in China to manufacture drones for use in Ukraine. The programme has not previously been reported.

Kupol's reports did not give more precise locations for sites related to the project. Reuters was also unable to determine whether the defence ministry gave the company the green light to proceed with the serial production proposed.

Beijing has repeatedly denied that China or Chinese companies have supplied Russia with weapons for use in Ukraine, saying the country remains neutral.

In response to questions for this article, the foreign ministry told Reuters that China's position presented a contrast with other nations with "double standards on arms sales" whom it said had "added fuel to the flames of the Ukrainian crisis".

The ministry said earlier this month that there were no international restrictions on China's trade with Russia, when responding to a Reuters report that Kupol had started to produce the Garpiya-A1 long-range military drone in Russia using Chinese engines and parts.

The new documents reported here indicate state-owned Kupol has gone further by sourcing complete UAVs from China.

Both Russia and Ukraine are racing to ramp up their production of drones, which have emerged as highly effective weapons in the war.

David Albright, a former U.N. weapons inspector who heads the Institute for Science and International Security research group, and has conducted extensive work on Chinese and Russian cooperation on drone production, told Reuters that Kupol could skirt Western sanctions on Russia by setting up a production facility in China where it could access advanced chips and expertise.

But Bendett at the Center for a New American Security said Beijing had reason to tread carefully: "For a factory to exist officially that builds UAVs for the Russians exposes China to some of the more severe effects of the sanctions, so it's not clear the extent to which China would be willing to expose itself."

The Ukrainian government did not respond to a request for comment for this article.

The G3 is an upgraded version of the Garpiya-A1 drone, according to Kupol's reports sent to the defence ministry. It was redesigned by Chinese experts working off blueprints of the Garpiya-A1, they said.

Kupol said that within eight months, the project in China would be ready to produce a Chinese-designed REM 1 attack UAV with a payload of 400 kg. The two European intelligence sources said this system would be similar to the U.S. Reaper drone.

The sources said another Russian defence firm called TSK Vektor acted as the intermediary between Kupol and Chinese suppliers in the project. They said the Russian firms worked with a Chinese company called Redlepus TSK Vector Industrial, based in Shenzhen, without specifying Redlepus' role, read the report.

TSK Vektor and Redlepus did not respond to requests for comment.

A separate document reviewed by Reuters reveals plans involving Kupol, TSK Vektor and Redlepus to establish a joint Russian-Chinese drone research and production centre in the Kashgar special economic zone in China's Xinjiang province.

Reuters was unable to determine who produced the document, which bore the logos of the three companies, or identify the intended recipient.

The 80-hectare "Advanced UAV Research and Manufacturing Base" would be able to produce 800 drones a year, the document said. No timeline was given for when it would be operational.

Last week, Russian President Vladimir Putin said his military had received around 140,000 drones in 2023 and that Moscow planned to increase this number tenfold this year.

"Whoever reacts faster to demands on the battlefield wins," he told a meeting in St Petersburg about drone production.

Iran has brokered ongoing secret talks between Russia and Yemen's Houthi rebels to transfer anti-ship missiles to the militant group, three Western and regional sources said, a development that highlights Tehran's deepening ties to Moscow.

Seven sources told Reuters that Russia has yet to decide to transfer the Yakhont missiles – also known as P-800 Oniks - which experts said would allow the militant group to more accurately strike commercial vessels in the Red Sea and increase the threat to the U.S. and European warships defending them.

The Wall Street Journal reported in July that Russia was considering sending the missiles. Iran's role as an intermediary has not been previously reported.

The Houthis have launched repeated drone and missile strikes on ships in the crucial Red Sea shipping channels since November to show support for Palestinians in the Gaza war with Israel.

They have sunk at least two vessels and seized another, disrupting global maritime trade by forcing shipping firms to divert cargos and, according to industry sources, driven up insurance costs for ships plying the Red Sea.

In response, the United States and Britain have struck Houthi positions but have failed to stop the group's attacks.

Two regional officials aware of the talks said that the Houthis and Russians met in Tehran at least twice this year and that the talks to provide dozens of the missiles, which have a range of about 300 km, were ongoing with further Tehran meetings expected in coming weeks.

Russia has previously supplied the Yakhont missile to Iran-backed Hezbollah.

One of the sources said the talks started under Iranian President Ebrahim Raisi, who died in a helicopter crash in May.

"Russia is negotiating with the Houthis for the transfer of Yakhont supersonic anti-ship missiles," said a Western intelligence source. "The Iranians are brokering the talks but do not want to have their signature over it."

Neither Iran's U.N. mission nor the Russian Defense Ministry responded to requests for comment.

"We have no knowledge of what you have mentioned," said Mohamed Abdel-Salam, the official spokesman for Yemen's Houthis.

A senior U.S. official declined to name the specific systems that could be transferred but confirmed that Russia has been discussing supplying missiles to the Houthis, calling the development "very worrisome."

A U.S. Defense Department official said any efforts to bolster the Houthis' capabilities would "undermine the shared international interest in global freedom of navigation and stability in the Red Sea and broader Middle East.”

Russia-Iran Links

Russia and Iran have been nurturing closer military ties amid Russia's war in Ukraine. Tehran has allegedly transferred ballistic missiles to Moscow for use against Ukraine, the United States said earlier this month.

One motivation for Moscow to arm the Houthis, three sources said, is the possibility that Western states could decide to allow Ukraine to use their weapons to strike farther into Russian territory.

The senior U.S. official said the Russia-Houthi talks “seem to be related to our posture in Ukraine and what we’re willing or not willing to do” regarding Kyiv’s requests for the lifting of restrictions on its use of long-range U.S.-supplied weapons to strike targets deep inside Russia.

Russian President Vladimir Putin warned in June that Moscow could send advanced long-range weapons - similar to those the United States and its allies give Ukraine - to the West's adversaries around the world.

The Yakhont is considered one of the world's most advanced anti-ship missiles, designed to skim the sea's surface to avoid detection at more than twice the speed of sound, making it difficult to intercept.