No breakthrough with IMF on SBP autonomy issue

The second round of dialogue between Law Minister Dr Farogh Naseem and International Monetary Fund mission chief for Pakistan Ernesto Ramirez Rigo for the revival of its $6 billion Extended Fund Facility (EFF) ended inconclusively, as both sides could not agree on a new consensus draft of the State Bank of Pakistan (Amendment) Bill, 2021.

The meeting, held on Tuesday, lasted about an hour in which Pakistan proposed that the federal government would retain the right to set policy direction and give inflation targets to the central bank, the participants of the meeting told The Express Tribune.

The draft bill, which was approved by the cabinet, was silent on the question of the inflation target. The SBP bill appears to be an attempt to consolidate power in the name of autonomy.

The finance ministry on Wednesday gave the final read to its position vis-à-vis the SBP amendment bill while keeping in mind the discussions that took place with the IMF a day earlier, the constitutional requirements, and the prevailing legal framework, they added.

“The position will be shared with the IMF mission chief and on the basis of it a final meeting on the subject of the SBP bill will take place soon.”

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Sources said the IMF mission chief asked the Pakistani team to provide details about the clauses of the bill that were ultra vires of the Constitution and laws, like the Companies Act of 2017.

The sources said that the IMF mission chief’s hands were also tied as the IMF board would seek implementation of the loan conditions agreed upon at the time of the 5th review of the programme. The sources said that the authorities concerned considered December 22 and January 14, 2022, as alternate dates for the board meeting, subject to the implementation of all prior actions.

When contacted, Teresa Dabán Sanchez, the Resident Representative of the IMF, said that the IMF code of conduct does not allow interaction with the media on details of discussions.

She had been requested to comment whether it was correct that a meeting between IMF mission chief and the law minister on the issue of the SBP bill remained inconclusive on Tuesday and that the government told IMF that it cannot get the SBP amendment bill passed in its present form from parliament.

“The IMF team and the Pakistani authorities remain engaged and are conducting discussions on the set of policies and reforms needed to complete the 6th review under EFF,” said Teresa.

Finance Ministry Additional Secretary (in-charge) and official spokesman Yusuf Khan did not reply to the questions, including whether it was still possible that the 6th review can be completed and approved by the IMF board in the calendar year 2021.

The government again told the IMF that it would retain the option to borrow from the central bank, as the government cannot afford to even default on local currency or let commercial banks exploit it. “The IMF mission chief was not ready to accept this change,” said the sources.

The sources said that as the majority shareholder, the government also wanted to retain the finance secretary on the board of the central bank which it earlier had agreed to withdraw.