By Staff Reporter
ISLAMABAD: Pakistan on Friday received a Letter of Intent (LoI) from the International Monetary Fund (IMF) to formally request the board of Washington-based lender to release two tranches worth $1.17 billion and an additional one billion dollar and a year’s extension in the bailout loan facility.
The letter is a step towards inflows of much-needed dollar into the cash-strapped country.
“All the process are narrowed now and with the LoI in our hands we have come very close to having both the tranches,” a finance ministry official said.
Finance Minister Miftah Ismail and acting State Bank of Pakistan (SBP) governor Murtaza Syed will jointly sign the letter which would be presented at the lender’s board meeting due August 29 for approval.
The board review would pave the way for release of the much-awaited loan tranches that had been on hold since earlier this year. The IMF and Pakistan reached a staff-level agreement on the combined reviews of bailout in July.
Three years ago, the Pakistan government under Prime Minister Imran Khan had inked a 39-month $6 billion programme with the IMF. The present coalition government had sought an additional one billion dollar and a year’s extension in the facility, to which the IMF agreed.
Pakistan entered the IMF programme in 2019, but only half the funds have been disbursed to date as Islamabad has struggled to keep targets on track.
Like most emerging economies, Pakistan was badly hit by soaring global oil and food prices over the past year, but the new government’s economic troubles were exacerbated by the failure of the previous administration of cricketer-turned-politician Khan to cut fuel subsidies.
Khan, just before voted out in a no confidence move in the parliament, massively subsidized fuel prices and electricity rates.
Aside from the unsustainable external deficit, Pakistan is also faced with inflation close to 25 percent, depleting foreign currency reserves, a rapidly falling economic growth rate, and excessive government borrowing to finance a budget deficit.
Analysts say other multilateral lenders and friendly governments will be more willing to help if they see the IMF bringing some discipline to Pakistan’s efforts to put its economy in order.
The IMF has given Pakistan several actions plan, including an increase in energy prices. There are some structural benchmarks as well including committing not to grant further tax amnesties and tax exemptions.
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