• PM promises Fund chief ‘relief-budget’ within programme requirements
• Terms statement by Nathan Porter ‘intervention in domestic political matters’
• SBP gives clean chit to banks for allegedly ‘manipulating’ dollar rates

ISLAMABAD: Pakistan on Wednes­day saw a new window of hope to get stalled funding from the International Monetary Fund (IMF) after Prime Minister Shehbaz Sharif’s telephonic engagement with Kristalina Georgieva, the managing director of the Washington-based lender, the last weekend as the government promised a ‘relief budget’ next week within the requirements of the Fund programme.

“We are following the programme in earnest at this stage and strongly hope that issues with the IMF would be settled very soon as the prime minister, the Ministry of Finance and the entire government were committed to the IMF programme and its amicable completion,” said Minister of State for Finance and Revenue Dr Aisha Ghaus Pasha.

The programme has been hanging in balance since October 2022, altho­ugh staff-level negotiations on the 9th quarterly review concluded on Feb 9.

Talking to journalists after a meeting of the Senate Standing Committee on Finance and Revenue, Dr Pasha said the prime minister had spoken to the IMF managing director and both sides were of the view that the programme should be completed at the earliest.

“We are not even thinking anything without the (Fund) programme”, although the finance ministry was not sitting idle with closed eyes as everybody had second plans as well, she said, adding that both the prime minister and IMF chief appreciated agreed that non-completion of the ongoing Fund programme was neither in the interest of Pakistan nor the IMF.

She termed “extraordinary” a recent statement of IMF’s mission chief on Pakistan’s political situation, saying “Nathan Porter should not have interfered in Pakistan’s domestic political matters”. She said the government had not received anything of that sort in writing or verbally during engagements with the Fund team.

In a recent written statement, Mr Porter had said: “We take note of recent political developments, and while we do not comment on domestic politics, we do hope that a peaceful way forward is found in line with the Constitution and the rule of law.”

Dr Pasha said the government had to move forward under the rule of law so that all institutions of the state could perform within the requirements of the Constitution and her party and the government were the key promoters of democracy.

She said the government was making preparations to ensure the presentation of the federal budget for the next fiscal year on June 9 and the budget was being prepared within the requirements of the Fund programme and had been shared with the lender as the government was in a Fund programme and was in constant engagement with the IMF.

“We have already shared budget numbers with the IMF and there has been progress on that as well because we have to move ahead keeping in mind the requirements of Pakistan as we have to move towards economic stability and provide as much relief to the common people as possible within the given circumstances,” she said.

Responding to a question, she said there were strong hopes about the completion of the Fund programme by June 30 when the existing programme was due for completion and since the programme had already been extended, no further extension was under discussion at present.

Talking about another IMF programme, she said the focus was currently on the successful completion of the ongoing programme and once it is completed, only then it could be decided how to move forward.

Responding to a question about election-year budget with subsidies and relief being demanded by the business community, Dr Pasha said the IMF was not against the targeted subsidies and they have not discouraged Pakistan in providing relief to the common people.

Clean chit for banks

Earlier, State Bank of Pakistan (SBP) Deputy Governor Dr Inayat Hussain, while briefing the standing committee on banks’ scam of extra US dollar rates charged from the customers for the opening of letters of credit (LCs), said the central bank gave a clean chit to the banks after nine months on the increase in dollar value. He said the investigation has been completed and no illegal activity had been observed, although their role was irresponsible in rupee depreciation and profiteering.

He said the upcoming budget may tax the profits of banks making extra profits on the dollar.

The committee was told that the SBP had moved to a market-based foreign exchange regime in which the spread charge on foreign exchange sale/purchase transactions was generally determined by the banks based on market conditions like liquidity and short net open positions of the banks were the main reasons of charging higher spreads by the banks during May-August 2022.

He said the SBP has conducted a limited-scope inspection of the matter and furnished its report to Finance Division. It was observed that the overall increase in FX income of the banks was mainly driven by higher spreads due to heightened volatility.

In some cases, the banks charged higher spreads. The SBP was in the process of imposing monetary penalties on the banks. It was also apprised that the SBP has initiated enforcement action against the banks involved under its supervisory framework.

Published in Dawn, June 1st, 2023