Islamabad: Pakistan reached a staff-level agreement with International Monetary Fund (IMF). Islamabad received letter of intent (LOI) a document declaring preliminary commitment of one party to do business with another from global lender.

Receipt of LOI shows that Pakistan’s deal with IMF to release two tranches worth $ 1.17 billion under a stalled loan facility is trudging closer to finish line.

Letter is now to be jointly signed by Finance Minister Miftah Ismail and acting State Bank of Pakistan (SBP) Governor Murtaza Syed.

IMF and Pakistan reached a staff-level agreement in second week of July after months of deeply unpopular belt-tightening by government, which took power in April and has effectively eliminated fuel and power subsidies.

New government had slashed a raft of subsidies to meet demands of global financial institutions but risks wrath of an electorate already struggling under weight of double-digit inflation. An original $ 6 billion bailout package was signed by former Prime Minister Imran Khan in 2019, but repeatedly stalled when his government reneged on subsidy agreements and failed to significantly improve tax collection.

“It is indeed good to learn that LOI signed by Pakistan will be forwarded to IMF immediately to ensure Board approval in August,” Former adviser to Ministry of Finance Dr Khaqan Najeeb told.

“Hopefully this can ensure disbursement of $1.17 billion by end of August,” he said, adding that for countries like Pakistan with a vulnerable balance of payments position and low reserves at $ 7.8 billion IMF is best anchor to avoid distress.

Government was also forced to present “a mini-budget for reviving suspended IMF programme” as Pakistan Democratic Movement led government snapped under retailers’ pressure and waived their fixed tax, which was supposed to be collected through electricity bill. “A mini-budget is on cards as government has decided to promulgate an ordinance for taking additional taxation measures to fetch Rs 18 billion into national kitty,” official had said.

Published in The Daily National Courier, August, 13 2022

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