Pakistan passes IMF-backed law

28/1/2022 18:42

        Pakistan's upper house of
        parliament put the seal on Friday on a law backed by the
        International Monetary Fund (IMF) to give the central bank more
        independence in decision-making.
        
        The new legislation, passed by 43 votes to 42, was one of
        several conditions by the IMF for revival of a stalled $6
        billion funding programme. The lower house had passed the law
        earlier this month.
        
        The bill gives the bank independent powers to control price
        stability and monetary policy decisions, plus guaranteed tenure
        for its governor.
        
        It also stops the government from borrowing from the bank.
        
        The IMF review board is next meeting on Feb. 2 to discuss a
        pending tranche of $1 billion.
        
        To meet its conditions, Pakistan has also passed a mid-year
        budget to end exemptions on sales tax as part of fiscal
        tightening to raise 343 billion rupees ($1.93 billion) for the
        2021-22 financial year.
        
        Foreign inflows are critical to Pakistan's economy given
        that its external account deficit has widened on the back of
        soaring global commodity prices, particularly oil which makes up
        about a third of the country's payments.
        
        Foreign exchange reserves are also a key buffer to stabilise
        the rupee. Pakistan only last year adopted a market-based
        exchange rate, resulting in a sharp depreciation of the rupee.
        
        Pakistan earlier this week raised $1 billion with a 7-year
        sukuk, offering an interest rate of 7.95%, the highest return
        the South Asian nation has ever paid on an Islamic bond.