Govt to send LoI to IMF today

ISLAMABAD: The government is all set to dispatch its signed Letter of Intent (LoI) to the International Monetary Fund (IMF) on Tuesday (today) as Islamabad has made a fresh request to the Fund staff for making some slight changes in it.

Now the mini budget will be unveiled through the promulgation of the Presidential Ordinance to fetch additional taxes. “At the moment, Pakistani authorities are holding talks with the IMF’s Mission Chief with the request to make some slight changes in the LoI” one top official revealed while talking to The News here late Monday night.

The IMF’s Executive Board is scheduled to hold a meeting on August 29, 2022 in Washington D.C for considering Pakistan’s request for completion of the 7th and 8th reviews and release of the next tranche worth $1.17 billion under the Extended Fund Facility (EFF). Pakistan has also made a request to the IMF for augmenting the EFF programme by $1 billion, increasing it from the existing $6 billion to $7 billion and also jacked up the timeframe from September 2022 to June 2023.

Federal Minister for Finance Miftah Ismail and Acting Governor State Bank of Pakistan (SBP) Dr Murtaza Syed would duly sign the LoI document and it would be dispatched to the IMF’s Executive Board. Then the signed LoI will be circulated among the board members for reviving the stalled Fund program 15 days prior to holding the IMF’s Executive Board meeting. So far Pakistan had received $3 billion and with the approval of the next tranche, the total disbursement will go up to $4 billion under the existing EFF programme. Now another $3 billion funding has been left for Pakistan that will be reimbursed after the completion of three more reviews under the augmented $7 billion programme.

The top official sources said that now the government would have to promulgate an ordinance to unveil the mini-budget prior to the IMF’s Executive Board meeting scheduled to be held in Washington D.C on August 29, 2022. The FBR sources said that the government would promulgate an ordinance to take additional taxation measures to compensate tax losses that occurred in the wake of waiving of fixed tax for retailers through electricity bills. “Yes, we are working on the ordinance that might be promulgated before the IMF’s board meeting,” said one top official and added that the revival of the IMF programme would help the government to muster up dollar inflows mainly from the multilateral creditors through resumption of program/policy lending for budgetary support.

Pakistan’s foreign currency reserves held by the SBP had decreased significantly and stood at $7.8 billion on August 5, 2022, against over $20 billion in the same month of the last year 2021, indicating that the foreign reserves held by the SBP decreased by $12.2 billion just in last 12 months period. Such a steep fall in the foreign exchange reserves must have rung alarm bells among the dwellers of Q Block (Ministry of Finance) and State Bank of Pakistan so there would be no other options available to policymakers but to shore up dwindling reserves to create buffer stocks for avoiding any short- term looming crisis.