Ahead of IMF's 6th review, Senate approves SBP (Amendment) Bill, 2021

The Senate passed on Friday the State Bank of Pakistan (SBP) (Amendment) Bill, 2021, by a margin of one vote, scraping through to meet the last key condition of the International Monetary Fund (IMF) programme ahead of the sixth review that is set to take place on February 2.

Finance Minister Shaukat Tarin tabled the bill which was approved with a slim majority (margin of one vote), Aaj News reported. The vote-count first indicated a 43-43 tie before Senate chair Sadiq Sanjrani voted in favour of the bill, helping the government meet its mandate.

Earlier, Tarin stated that the passage of the SBP bill is a “prior” condition that has to be implemented ahead of the IMF board meeting.

Another date: IMF board to now meet on February 2 for Pakistan's sixth review

The SBP (Amendment) Bill 2021 has been a source of major debate in recent weeks with the opposition claiming that it will hand over powers of the central bank over to the IMF. However, in its response, the government has maintained that it will "retain control" of the SBP.

The debate continued even on Friday as opposition senators stood and chanted slogans against the government while Tarin tabled the bill.

Earlier, in its bid to secure the next tranche of the IMF's Extended Fund Facility (EFF), the government also passed the Finance (Supplementary) Bill, known more commonly as the 'mini-budget', that withdraws sales tax exemptions to the tune of Rs343 billion.

While the government managed to enforce the Finance (Supplementary) Act, 2022 from January 16, 2022, it was the SBP (Amendment) Bill, 2021 that needed Senate approval.

Also read: Editorial SBP bill: Opposition has to lend govt a hand

On Friday, following the approval, Minister for Information and Broadcasting Fawad Chaudhry took to his Twitter handle and termed it “another success” for the government.

The Senate session has now been adjourned till Monday.

IMF programme

The IMF Executive Board will meet on Wednesday (Feb 2) for Pakistan's sixth review under the EFF. Earlier, a staff-level agreement was reached in November last year on policies and reforms needed to complete the next review.

Among them were passage of the 'mini-budget' and the SBP (Amendment) Bill, 2021.

Completion of the review would make available SDR 750 million (about $1,059 million), bringing total disbursements under the EFF to about $3,027 million.

The IMF board approval, which is now highly likely, would give a major boost to Pakistan's markets that have seen months of uncertainty around the programme. The rupee has depreciated to record lows on multiple occasions, while the KSE-100 Index, a key benchmark, has remained stagnant for weeks.

"It's a positive for the markets -- equities, forex, and fixed income," Samiullah Tariq, Head of Research and Development at Pak Kuwait Investment Company, told Business Recorder. "The development brings certainty regarding continuity of policies, availability of funds among others."

The IMF programme, many believe, also opens doors for Pakistan to tap the international markets to raise further funds. Just a few days ago, Pakistan issued US$1 billion Islamic sukuk in the international market at 7.95 percent interest rate for a period of seven years.

AAH Soomro, former managing director at KASB Securities, also termed the development as a positive.

“Expect IMF's approval on February 2 along with flow of dollars from multilateral lenders,” said Soomro in a tweet post.

He said that following the development, credit spreads should improve, as ‘forceful fiscal discipline’ would be back.

“PSX to rejoice. Pak rupee might too,” he said.