Pakistan receives letter of intent from IMF, inches closer to sealing bailout deal

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

The 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 the finish line.

The letter is now to be jointly signed by the Finance Minister Miftah Ismail and Acting State Bank of Pakistan (SBP) governor Murtaza Syed.

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

The staff-level agreement would be reviewed by the Fund’s board at a meeting due on August 29. The board would also consider adding $1 billion to a $6 billion programme agreed on in 2019.

The new government had slashed a raft of subsidies to meet the demands of global financial institutions but risks the wrath of an electorate already struggling under the 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.