Islamabad received the letter of intent (LOI) from the international lender a few days after Pakistan and the IMF established a staff-level agreement. An LOI is a document that states a party’s preliminary commitment to conduct business with another.
The receipt of LOI indicates that Pakistan’s agreement with the IMF to disburse two tranches totaling $1.17 billion under a loan facility that has stalled is getting closer to completion.
Now, the Finance Minister Miftah Ismail and Acting SBP Governor Murtaza Syed must both sign the letter.
A staff-level agreement between the IMF and Pakistan was achieved in the second week of July, following months of the government’s hugely unpopular efforts to tighten its belt. The government, which took office in April and has since practically eliminated fuel and power subsidies.
The Fund’s board would examine the staff-level agreement at a meeting scheduled for August 29. The board would also think about increasing a $6 billion program approved in 2019 by $1 billion.
In order to satisfy the demands of global financial institutions, the new government cut a variety of subsidies, but in doing so, it risks offending the populace, which is already suffering from 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.