Pakistan sends back LOI to IMF after signing

August 17, 2022 (MLN): Pakistan has signed a final letter of intent (LOI) which was received from the International Monetary Fund (IMF) last week.

The IMF LOI was signed by the Finance Secretary after which it has been returned to the IMF, after fulfilling the pre-requisites.

The LOI is designed for the revival of the loan programme under the staff level agreement (SLA) and memorandum of economic and fiscal policies (MEFP) signed last month.

According to Finance Ministry, the loan disbursements under the Extended Fund Facility (EFF) will likely start by the end of this month as the IMF board is expected to meet on August 29 to approve two $1.17 billion tranches and increase Pakistan’s loan facility by at least another one billion dollars.

Federal Minister for Finance and Revenue Miftah Ismail while addressing a press conference yesterday said that the government had received LoI from the fund requiring some edits by the State Bank of Pakistan (SBP) and Finance Ministry, which were done after holding meetings with IMF. After that new LoI was received yesterday which has been signed and sent back to IMF today.

In response to a question regarding the Presidential Ordinance for the levy of new taxes, the finance minister said that no decision has been taken about introducing new taxes through an ordinance. "The prime minister will make a final decision in this regard," he added.

The draft LOI apprised the IMF regarding Pakistan's commitment to the policies and objectives of the economic program supported by an IMF arrangement under the Extended Fund Facility (EFF).

Moreover, Pakistan has assured the Fund that the government will increase the price of petroleum products by imposing a levy of up to Rs50, the draft of LOI available with Mettis Global reads.

According to the draft, the government will impose a levy of Rs10 on petrol and Rs5 on diesel on September 1, 2022, followed by increases of Rs5 per month for both fuels until the PDL reaches Rs50 in January (petrol) and April (diesel).

At present, the levy on petrol and diesel stands at Rs10 and Rs20 respectively.

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