Pakistan passes IMF-backed law
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.