IMF mission chief meets SBP governor ahead of monetary policy

Timing of meeting crucial as central bank is to announce interest rate on Friday

KARACHI: The International Monetary Fund (IMF) Mission Chief for Pakistan Ernesto Ramirez-Rigo on Wednesday held a meeting with the State Bank of Pakistan (SBP) officials ahead of the central bank’s announcement of the key interest rate for the next two months.

"We discussed our issues," a top official at the central bank told The Express Tribune.

He, however, declined to share details of the issues discussed in the meeting between the SBP Governor Tariq Bajwa and the IMF official, who concluded his two-day introductory visit to Pakistan on Wednesday after assuming the post earlier this month.

Timing of the meeting, however, appeared crucial as the SBP is scheduled to announce the key interest rate for the next two months on Friday. The IMF has been asking authorities concerned to increase key interest rate and devalue rupee as pre-set conditions to obtain an IMF-supported loan, while it is the central bank which uses the two tools – interest rate regime and rupee parity adjustment with the US dollar and other major currencies – to give a direction to the country's economy.

The PTI government has been in talks with the IMF for the loan since it came to power in the aftermath of the July 2018 general elections. The two sides are now close to reaching an agreement, Finance Minister Asad Umar said after meeting with the mission on Tuesday.

“There is a possibility that Pakistan and the IMF may sign a deal at the end of IMF’s staff-level mission, which will arrive in the third week of April,” said Umar. Discussions would also take place during spring meetings of the IMF in Washington next month, he added.

The central bank has already increased the benchmark interest rate by a staggering 4.5 percentage points since January 2018 to six-year high of 10.25% at present. The rate is anticipated to be increased by another half-a-percentage-point to one percentage point on Friday, analysts said.

“Discussions towards an IMF-supported programme are ongoing," the IMF said in a statement issued at the conclusion of its mission chief’s two-day visit to Pakistan.

"Discussions focused on recent economic developments and prospects for Pakistan in the context of ongoing discussions toward an IMF-supported programme," it added.

In Islamabad, Ramirez-Rigo met with the Minister of Finance Asad Umar, PM’s Adviser Razzak Dawood, the Minister of Power Omer Ayub and the State Minister for Revenues Hammad Azhar.

He also met several senior government officials, including Finance Secretary Younus Dagha, Federal Board of Revenues Chairman Jehanzeb Khan and Adviser to the Prime Minister on Institutional Reforms and Austerity Ishrat Hussain. In Karachi, he met with SBP Governor Tariq Bajwa and other senior central bank officials.

Pakistan has received $9.2 billion in soft loans from various friendly countries, including China, Saudi Arabia and United Arab Emirates since beginning of the current fiscal year in June 2018 to date.

The country has obtained loans at an interest rate ranging between 2.5-5% in a bid to cover financing gap of around $12 billion for the ongoing fiscal year. Apart from this, it needs another $7-8 billion to cover the gap in the next fiscal year 2020.