Tag: International Monetary Fund (IMF)

  • Pakistani govt seeks help for balance of payments: IMF

    Pakistani govt seeks help for balance of payments: IMF

    The International Monetary Fund (IMF) has confirmed that the new government in Pakistan has reached out to it, seeking support for the country’s balance of payments. It said a delegation of the country would be in Washington this week for a follow-up meeting.

    “The IMF looks forward to continuing supporting Pakistan’s authorities on economic policies and reforms to ensure macroeconomic stability in the country amidst the current challenging global economic environment,” IMF’s Resident Representative in Islamabad Esther Perez Ruiz told Dawn News.

    She also confirmed that as part of the IMF’s “continued engagement with Pakistan” she last Friday met with finance minister-designate Miftah Ismail, ahead of the visit of Pakistan’s delegation to Washington during Spring Meetings.

    Top government sources confirmed that a delegation also comprising Secretary Hamed Yaqoob Shaikh and State Bank of Pakistan (SBP) Governor Dr Reza Baqir would be meeting the new IMF mission chief to Pakistan Nathan Porter on Monday evening, besides other fund officials.

    Pakistani delegation likely to meet fund officials this week

    Efforts were on to ensure that Mr Ismail also joins the Washington meetings physically and hopefully take this opportunity to call on IMF Managing Director Kristalina Georgieva and seek her support for the revival and completion of the stalled fund programme. These sources said former finance minister Shaukat Tarin had sought to arrange a meeting with Ms Georgieva during these meetings as negotiations with the fund staff had stalled following Feb 28 fuel subsidies and tax amnesty announced by former prime minister Imran Khan.

    The new finance minister would be more eager to seek blessings of the IMF’s top management at the outset for smooth engagements with the staff to put the programme back on track and ensure foreign inflows for the direly needed balance of payment support. There are, however, at least three issues that the authorities are trying to resolve as the spring meetings (April 18-24) are opening today.

  • SBP governor hopeful about IMF programme to resume

    SBP governor hopeful about IMF programme to resume

    Pakistan’s economic fundamentals have continued to remain strong and the unpopular decisions of the government to hike the energy prices in future is likely to get $6 billion International Monetary Fund (IMF) loan programme back on track.

    The engagement of the Ministry of Finance and the central bank with the International Monetary Fund (IMF) remains strong.

    “In the current political environment, it is no surprise that the unpopular decisions, such as increase in fuel and electricity prices, are proving difficult,” State Bank of Pakistan (SBP) Governor Reza Baqir said in an interview to Bloomberg TV on Monday.

    “We are confident that very soon, we will be able to put the delay (in resumption of IMF programme) behind us and announce the good news of attaining the next tranche from the IMF.”

    Pakistan has received half of the funding from IMF. It negotiated $6 billion loan package in June 2019 and it has received $3 billion so far. Another $3 billion is left to be received.

    “Our goal is to first complete the work which will bring in the remaining $3 billion and after that, if we need (more), we can negotiate it in future,” the SBP Governor said.

    IMF is important not just for money but also for the signal that it sends of good housekeeping on the economic policy that catalyses funding from other bilateral creditors as well as private capital markets.

    “We are hopeful that with that positive message coming out, we will be able to mobilise funding from other sources other than IMF,” he said.

    When domestic political uncertainty was taking toll on local financial markets in the recent past, the central bank considered 250 basis point hike in key policy rate “important to fix the bubble of economic uncertainty,” he said.

    It is important that economic policy making institutions act on a timely basis to ensure that the goal of financial stability remains.

    “Since the decision (of rate hike), the rupee has rallied nearly 2% and stock market rallied about 1.5% and yields on three and five-year bonds in Pakistan fell about 35 basis points.”

    Last year (fiscal year 2020-21), Pakistan’s economy grew by around 5.5%. “Our projection for growth this fiscal year is 4% even with multiple hikes in the interest rate.

    Pakistan’s central bank increased the key policy rate by a massive 250 basis points in an emergency meeting as it had “concerns related to price instability and foreign exchange market,”

    According to him, there were three main factors that forced the central bank to arrange an emergency monetary policy meeting.

    First, uptrend in oil prices has persisted since March and oil futures are about 10-12% higher for next fiscal year.

    Secondly, inflation in March for Pakistan was 50-100 basis points higher than the previous month. The headline inflation stood at around 12.7% and core inflation was 9%.

    Finally, rupee had lost significantly (over 5%) during the past few weeks owing to political uncertainty, Baqir recalled.

    “When we feel that our financial markets are threatened by political instability, we take important steps that are one of the key reasons behind the timing of our (emergency) monetary policy decision last week,” he said.