Good news for economy as Pakistan clears last hitch ahead of IMF board meeting

ISLAMABAD: Pakistan has received the letter of intent (LoI) from the International Monetary Fund (IMF) which will now be signed by the relevant authorities and sent back before the Fund’s board meeting.

The country is expected to get two tranches worth $1.17 billion under a stalled loan programme.

The two sides had reached a staff-level agreement in the second week of July. The staff-level agreement would be reviewed by the Fund’s board at a meeting due on August 24.

The board will also consider adding $1 billion to a $6 billion programme agreed in 2019.

Pakistan has fulfilled all prior actions including removing subsidies from petroleum products and increasing tax rates which increased inflation to record levels.

The country suffered a massive economic crisis due to the delay in the revival of the IMF programme and political uncertainty. The local currency depreciated to a historic low amid fears that the country is heading towards default.

COAS General Qamar Javed Bajwa had also approached the US government, seeking to expedite the process. The army chief then talked to Saudi Arabia and UAE in order to get assurances for meeting the financing gap.

‘IMF is best anchor to avoid distress’

“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 Geo.tv.

“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 the best anchor to avoid distress.

The economist said: “We must realise that the scarcity of foreign inflows to Pakistan over the past few months is largely due to the delay in completing the seventh and eighth review of the programme with the IMF.”

He maintained that the strength in the forex market, a reversal in yields of Pakistan Euro bonds and improvement in Pakistan's central depository system have a lot to do with the news of the continuation of the IMF programme.