IMF objects to direct borrowing

The International Monetary Fund (IMF) has raised objections to Pakistan’s plan to directly borrow from local commercial banks in relaxation of competition rules, resisting the move that might cause distortion in the debt market. The objections were raised during a meeting held on Monday between Pakistani authorities and an IMF team, according to sources. The IMF did not endorse federal cabinet’s decision in which the Ministry of Finance was authorised to borrow from commercial banks in closed-door negotiations. “Direct lending issue is still being discussed with the IMF,” said Secretary Finance Hamed Yaqoob Sheikh on Tuesday. Pakistan and the IMF are heading towards a staff-level agreement at a snail’s pace. A couple of issues remain pending in addition to finalisation of the Memorandum of Economic and Financial Policies (MEFP), a set of policies that the country will implement during the remaining period of current fiscal year. Both sides on Monday also discussed the contours of next quarterly performance criteria in core programme areas and also fine-tuned the draft of MEFP. Electricity and taxation areas have almost been finalised, except for a notification about imposition of 25% general sales tax (GST) on dozens of items.