ISLAMABAD: The approval of the State Bank of Pakistan (SBP) Amendment Bill 2021 has literally become a 'make or break' issue for the revival of the stalled IMF programme.
Top official sources indicated that the government may try to get the controversial SBP Amendment Bill 2021 passed by a bulldozer in the Senate meeting today (Friday). If this is not done on a Friday, then on February 2, 2022, Washington D.C. There are two more working days left for the next week i.e. Monday and Tuesday till the meeting of the Executive Board of the IMF to be held in May.
The board of the IMF will consider Pakistan's case for completing the Sixth Review and releasing the $1 billion tranche under the Extended Fund Facility (EFF). The board of the IMF had extended the scheduled meeting three times on the request of Pakistan. If this turns out to be a final extension, the IMF may ask for a re-negotiation by December 2021, taking into account the latest available macroeconomic data, sources said. The sixth review was done based on official data from Parle till September 2021. Relevant sources asked how much this could be increased.
It is a serious question for the IMF when mainstream political parties including the PMLN and PPP are publicly declaring that whenever they come to power, they will undo all the controversial amendments to the SBP. Law. Any law of extreme importance to the economy should have been passed with a greater consensus rather than expediency because if it is bulldozed, it will not last long.
On the other hand, a top cabinet minister in the PTI government confirmed to The News on Thursday that the government will get the approval of the Senate of Pakistan to convert the SBP's amendment bill into an Act of Parliament. "There will be no need to convene a joint sitting of both the Houses of Parliament to pass the SBP's Amendment Bill 2021," he said.
When contacted, former Director General (DG) of Economic Reforms Unit (ERU), Ministry of Finance, Dr Khaqan Najeeb said that it is not entirely correct to say that Pakistan has done 22 programs with the IMF. Most of the programs the country signed with the IMF were abandoned after a few installments and never completed.
The experience of completing the 2016 program showed us that the success of the IMF-backed program depends on the country's preparedness, ability to interpret data and ability to technical analysis – all with high caliber and trained professionals and a well-prepared team are dependent on. , she added.
He noted that sometimes the design of Pakistan's programs with the IMF is hampered by the expediency and lack of handling of the fundamental issues facing the economy.
However, in the short term, it is necessary to complete the current program. As things stand, with gross financing needs for fiscal year 2022 alone surpassing $28 billion, the IMF's seal of approval is a prudent way forward.
"The IMF is a lender of last resort. Its approval ensures access to a number of multilateral and other international financing options at cheap mark-ups. The continuation of the IMF can remove uncertainty and help Pakistan with short-term financing," They said.
He expressed his opinion that the IMF could also be more considerate in its calibration. Inflation is an economic and social concern today. The thrust on a massive indirect tax effort of Rs 343 billion, in addition to the Rs 750 billion new tax policy measures already at the start of the program in 2019, carries a definite burden of price increases. Substantial increases in petroleum levies and full pass-through of energy prices, in times of double-digit inflationary pressures, do not paint a convincing picture. He said that with the price of oil going up to $100 a barrel, it is going to be painful for the low income earners.
Dr. Khaqan felt that while negotiating Pakistan's program with the IMF had always argued for the sovereignty of Parliament; Looks like that space has been squeezed out. Presentation of laws in Parliament as a condition of MEFP is now more in the form of approval by Parliament as seen in the case of two existing bills – the Mini Budget and the State Bank of Pakistan Autonomy Act.
When asked about the SBP bill, he remarked that the legislative changes required extensive political horse-drawn. All concerned should realize that the ownership of the SBP Bill is really important for a well functioning SBP and strengthening its capabilities.
One cannot argue against the operational independence of the central bank within the ambit of the state. Broad-based debate on how to best accomplish this freedom can actually be good, not hurtful.
This can help shape a bill that has the necessary changes and turns out to be a really good law. But with little time left before the IMF board date, it may have to rely more on expediency, he concluded.