Prime Minister Imran Khan has canceled a plan to call the managing director of the International Monetary Fund (IMF), which the government had agreed to make last week in order to get the official’s help in removing roadblocks to the $6 billion deal’s revival.
The idea was launched in response to the government’s intention to reintroduce some significant modifications to the already approved draught of the State Bank of Pakistan Amendment Bill 2021.
The government asked the IMF to allow it to make a few further amendments to the bill, including leaving the option of borrowing from the central bank open and maintaining the finance secretary on the SBP board.
The ratification of the SBP modification Bill 2021 and the introduction of a finance bill in the National Assembly to create a mini-budget remain the two major roadblocks to the $6 billion rescue package being resurrected.
Prime Minister Imran Khan and Finance Adviser Shaukat Tarin had proposed calling IMF Managing Director Kristalina Georgieva on the phone. According to the sources, the goal of the phone call was to enlist Kristalina’s help in softening the conditions on the SBP bill’s approval.
When asked if a call to the IMF managing director had been made last week, the Finance advisor responded on Monday, “There is no need for a telephone contact to the managing director of the IMF.”
On March 9, 2021, the federal cabinet adopted the SBP Bill without reading it. Furthermore, the problem was raised about handing the central bank complete authority and the federal cabinet’s acceptance of the measure without even studying it in March.
The finance ministry proposed some more fundamental amendments to the bill, in addition to calling half a dozen already authorized measures “unconstitutional.”
Last Monday, Pakistani Law Minister Farogh Naseem informed the IMF of Pakistan’s legal position on the SBP Bill, causing consternation at the IMF headquarters.
The IMF took some time to process the news that some of the bill’s changes were already unconstitutional.
After previously promising to permanently lock the door to borrowing from the SBP, the administration has now told the IMF that it wants to keep this option open. According to the law minister, the federal government has the ability to borrow money under the constitution.
The federal government has not borrowed from the central bank under the IMF program, but it is now hesitant to give this temporary prohibition, which has been in effect since July 2019, legal backing. According to sources, IMF Mission Chief Ernest Rigo declined to accept this proposal last week.
The government’s inability to borrow from the central bank has left it at the mercy of commercial banks, which have recently demanded interest rates much higher than the main policy rate of 7.25 percent.
The IMF is likely to announce its final position on the proposed new changes in the near future. The administration is racing against the clock to have a $1 billion loan tranche approved by December 17.