IMF rebuffs Imran Khan govt's borrowing request amid rising financial woes in Pakistan

Amid ongoing financial woes in Pakistan, International Monetary Fund (IMF) has rejected Islamab's request to keep door open for borrowing from central bank and also did not agree on any meaningful accountability of State Bank of Pakistan (SBP), reported ANI, citing  Express Tribune. As per  Pakistani Daily, central bank's profit would not be delivered to federal government in full unless SBP obtains cover to back its monetary liabilities. At least 20% of state bank's profit would henceforth be retained in IMF central bank's coffers until desired cover is obtained, reportedly.

Moreover, IMF rejected Pakistan's proposal to enable it to borrow up to 2% of its gross domestic product (GDP) in a fiscal year. According to  report, IMF's rejection comes despite Pakistani government's belief that it h a constitutional right to take loans to finance its operations. Although government is prohibited from borrowing from state bank under IMF programme until September 2022, cabinet has alrey given up and agreed to permanently close this door through law, according to report.

bank will not purchase securities issued by government, any government-owned entity, or any or public organisation in primary market. draft furr stated that bank may purchase such securities in secondary market. According to ANI, ban on borrowing from central bank has placed government at mercy of commercial banks, who have recently requested interest rates that are much higher than key policy rate.

However, IMF announced on Monday that weeks of negotiations with Pakistan h resulted in a tentative agreement to restart a $6 billion economic bailout for Islamic country. According to a statement issued by  International Monetary Fund, under new proposal, IMF will release approximately $1 billion to Pakistan, increasing total disbursement from $6 billion bailout to around $3 billion since 2019. meetings this month resulted in an agreement "subject to approval by Executive Board, following implementation of prior actions, notably on fiscal and institutional reforms," according to statement.

Pakistan's financial woes

In April 2020, IMF allocated $1.4 billion to Pakistan to assist it in dealing with an economic crisis caused by an increase in coronavirus fatalities. Since last year, at least 28,663 Pakistanis have lost ir lives due to COVID-19, and around 1.2 million have tested positive for new virus. According to analysts, fund wants Pakistan to decrease its budget deficit furr, raise power and gasoline costs, and combat money laundering and corruption. In recent weeks, government has complied with most of IMF's criteria, but doing so has me Prime Minister Imran Khan extremely unpopular among public, since inflation and price of critical foods have skyrocketed, according to AP.

According to officials, delay in reaching a deal between Pakistan and IMF was caused by strained relations between Pakistan and United States. Since Khan took office, US President Joe Biden has avoided making contact with him. This year, Khan publicly refused to supply Washington with bases for operations in Afghanistan, reportedly. United States, which wields considerable power over IMF, according to media agency, has stated that fund should not finance tens of billions of dollars in loans that Pakistan has obtained from China as part of Beijing's global Belt and Ro Initiative.

(With inputs from agencies)

(Image: AP)