You are here: Home » International » News » Economy
Business Standard

International Monetary Fund rejects Pakistan's borrowing request

The bank may purchase such securities in the secondary market, according to the draft

Pakistan  | IMF | International Monetary Fund


(Photo: Bloomberg)

The Monetary Fund (IMF) has rejected Pakistan's request to keep a door open for borrowing from the central bank amid the ongoing financial woes in the country.

The financial institution based in Washington also did not agree on any meaningful accountability of the State Bank of (SBP), The Express Tribune reported.

The Pakistani daily said the central bank's profit would also not be transferred 100 per cent to the federal government until the SBP gets cover to back its monetary liabilities. According to the report, at least 20 per cent of the state bank's profit will now remain in the central bank's coffers until it gets the desired cover.

turned down the government's proposal to allow it to take loans equal to 2 per cent of the gross domestic product (GDP) in a fiscal year. The did not budge despite the government's opinion that it was its constitutional right to take loans to finance its operations, the Tribune report said.

Although there is a ban on government borrowing from the state bank under the programme till September 2022, the government has now given up and agreed to permanently close this door through legislation, the report said.

"The bank shall not extend any direct credit to or guarantee any obligations of the government, or any government-owned entity or any other public entity," said a draft of the bill approved in March this year.

The report added that the bank shall not purchase securities issued by the government or any government-owned entity or any other public entity in the primary market. The bank may purchase such securities in the secondary market, according to the draft.

According to the Tribune report, the ban on borrowing from the central bank has left the government at the mercy of commercial banks that have in recent weeks demanded an interest rate that is significantly higher than the key policy rate.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Thu, November 25 2021. 03:16 IST