'Good news' of completing next IMF tranche on the cards: Governor SBP

Reza Baqir says unpopular decisions required by IMF are proving to be difficult in the current political situation

State Bank of Pakistan (SBP) Governor Reza Baqir on Monday said that the central bank is confident that it will soon announce the “good news” of completing the conditions required to obtain the next tranche of the International Monetary Fund (IMF).

In an exclusive interview with Bloomberg, Baqir stated that it is “no surprise” that “unpopular decisions” required by the IMF, such as, increasing fuel and electricity prices, are proving to be difficult given the current political situation.

He added that such problems were not individual to Pakistan but to other developing nations as well.

In light of these “unpopular decisions”, the SBP governor stated that it is not uncommon for institutions to face delays. However, he felt confident that Pakistan will “put the delay behind” it and announce the completion of the upcoming tranche.

Read: SBP reserves drop $728m to $11.32 billion

In response to a question regarding Pakistan’s dwindling forex reserves which are projected to sustain only a few months of imports, the governor extended a message to the investor community. "Such political processes are common in democratic societies and economic policy-making institutions should act in a timely manner to ensure economic stability," he said. 

Baqir’s comments are in response to the central bank’s decision to increase the policy rate to 12.25% during an emergency meeting on April 7, a jump not witnessed in the 21st century.

Defending the actions of the SBP, the governor stated that after the decision both the rupee and the stock market rallied.

“The fundamentals of Pakistan remain strong,” he stated, adding that the country’s economy grew 5.5% last year.

Read More: IMF tax proposals to make salaried class worse off

It must be noted that last month the talks between Pakistan and the IMF hit a dead end after the latter refused to accept the government’s decisions to give a blanket tax amnesty scheme to industrialists and a relief package for worth Rs246 billion.

However, the Ministry of Finance claimed that “negotiations under the 7th review are continuing as planned and the two sides remain engaged on a regular basis at a technical level through virtual meetings and data sharing”.