imf: IMF rejects Pakistan loan request – Times of India

ISLAMABAD: The International Monetary Fund (IMF) rejected Pakistancalls for keeping a door open for borrowing from the central bank amid the ongoing financial difficulties in the country.
The Washington-based international financial institution also did not agree to any significant liability of the State Bank of Pakistan (SBP), L’Express Tribune reported.
The Pakistani daily said that central bank profits would also not be transferred 100% to the federal government until the SBP obtains cover to cover its monetary liabilities. According to the report, at least 20 percent of the state bank’s profits will now remain in the coffers of the central bank until it obtains the desired coverage.
The IMF rejected the Pakistani government’s proposal to allow it to take out loans equivalent to 2 percent of gross domestic product (GDP) in a fiscal year. The IMF did not budge despite the government’s opinion that it was its constitutional right to borrow to finance its operations, according to the Tribune newspaper.
Although the government prohibits borrowing from the state bank as part of the IMF program until September 2022, the government has now given up and agreed to permanently close that door through legislation, according to the report.
“The bank must not extend any direct credit or guarantee any obligation of the government, or of any entity belonging to the government or any other public entity,” said a bill approved in March this year.
The report adds that the bank will not buy securities issued by the government or any public entity or any other public entity in the primary market. The bank can buy these securities on the secondary market, depending on the project.
According to the Tribune report, the ban on borrowing from the central bank has left the government at the mercy of commercial banks, which have demanded in recent weeks an interest rate well above the key rate.

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