Prime Minister Imran Khan has “dropped” a plan to make a telephone call to the managing director of the International Monetary Fund (IMF), which the government had decided last week to seek the official’s intervention to remove barriers to the revival of $6 billion deal.
The proposal had been floated amid the government’s decision to re-introduce some fundamental changes in the already approved draft of the State Bank of Pakistan amendment Bill 2021, sources told The Express Tribune.
The government requested the IMF to let it make some more changes in the bill, including keeping the option of borrowings from the central bank open and retaining finance secretary on the board of the SBP, sources said.
The approval of the SBP amendment Bill 2021 and introduction of the finance bill in the National Assembly to bring mini-budget remain two biggest stumbling blocks in the way of the revival of the $6 billion bailout package.
Sources told The Express Tribune that Prime Minister Khan and Finance Adviser Shaukat Tarin had discussed the proposal to make a telephone call to IMF Managing Director Kristalina Georgieva.
The purpose of the telephone call was to seek Kristalina’s intervention to soften condition on approval of the SBP bill, the sources noted.
“There is no need for a telephone call to the managing director of the IMF,” the finance adviser told The Express Tribune on Monday when he was requested to comment whether a call had been made to the managing director last week.
Usually, the IMF issues a statement or tweets about an interaction between the managing director and the head of a government.
Sources maintained that the government instead shared a list of new amendments that it now wants to bring in the SBP amendment Bill 2021.
The federal cabinet approved the SBP Bill on March 9, 2021 but without reading it. In March, The Express Tribune had raised the issue of giving absolute autonomy to the central bank and approval of the bill by the federal cabinet without even studying it.
In addition to terming half a dozen already approved clauses “unconstitutional”, the finance ministry suggested some more fundamental changes in the bill.
Law Minister Farogh Naseem had conveyed Pakistan’s legal position on the SBP Bill to the IMF last week, which created ripples at the IMF headquarter.
The IMF took time to absorb the disclosure that some of the changes already made in the bill were in fact unconstitutional.
In a major change, after earlier agreeing to permanently close the door of borrowing from the SBP, the government has now again suggested the IMF that it wanted to retain this option, sources said. The law minister told the IMF that under the constitution the federal government has the authority to borrow money.
The federal government has not been borrowing from the central bank under the IMF programme but it is now reluctant to give a legal cover to this temporary ban, in place since July 2019. Sources said that the IMF Mission Chief Ernest Rigo last week refused to accept this demand.
The ban on borrowing from the central bank has left the government at the mercy of commercial banks that in recent week have been demanding an interest rate that is significantly higher than the key policy rate of 7.25%.
The IMF is now expected to give its final position on the proposed new amendments. The government is running against time to achieve the goal of approval of $1 billion loan tranche by December 17.
Sources said government has showed its intention to retain the Monetary and Fiscal Policies
Coordination Board, which is an important statutory forum to align the monetary and fiscal policies of the country. As per the approved bill, the government had earlier agreed to abolish this board.
Sources said the government now also wanted to retain the finance secretary on the board of the central bank, which it earlier had agreed to withdraw.
The approval of the amendment bill was the condition that was hampering a deal between Pakistan and the IMF for $1 billion loan tranche, Tarin revealed last week.
Last week, the law minister had told the IMF about clauses that the federal cabinet had approved as part of attempts to give absolute autonomy without accountability but were unconstitutional provisions.
These are related to a mechanism for removal of the SBP governor, allowing him to appear before parliament by bypassing Finance Division, giving absolute immunity to the governor, and others from any kind of investigation and limiting parliament’s powers to amend the SBP law in the future.