Pakistan chides IMF for ‘meddling’ in internal matters

ISLAMABAD: Minister of State for Finance Dr Aisha Ghaus Pasha has termed the IMF’s Mission Chief Nathan Porter’s statement meddling in the internal affairs of the country and unusual, saying that the country was being run under the rule of law. Talking to journalists after attending the Senate Standing Committee on Finance and Revenues under the Chairmanship of Senator Saleem Mandviwalla here at the Parliament House on Wednesday, she said it was not the mandate of the IMF to interfere in the internal affairs what she knew about the lender of the last resort.

To another query, she said the Ministry of Finance possessed plan B in case of no IMF programme. The ministry has not closed its eyes to the situation, but the government priority would be revival of the Fund programme.

She said the financial year 2023-24 budget would be the election year’s budget, but it would be made to tackle realities on the ground whereby efforts would be made not to burden masses.She said the government was making budget plan for presenting it in the National Assembly on June 9, but formalities of seeking approval were not done yet.To another query, she replied that the IMF allowed targeted subsidies as they did not raise any objections over it.

Earlier, in the Senate committee meeting, the deputy governor State Bank of Pakistan(SBP) briefed the committee on the bank report about banks scam of extra US dollar rates being charged from customers for opening of LCs.The SBP deputy governor said the SBP gave a clean chit to the banks after 9 months on the increase in dollar value. He said the investigation had been completed and no illegal activity was observed.The banks’ role was irresponsible on rupee depreciation and profiteering, the SBP deputy governor said and hinted that the upcoming budget might slap tax on profits of banks making extra profits on dollars.

The committee was apprised that the SBP had moved to market based foreign exchange (FX) regime in which the spread charge on FX sale/ purchase transaction is generally determined by the banks on the basis of market conditions like (FX) liquidity and short Net Open FX Positions of the banks were the main reasons of charging higher spreads by the banks during May to August 2022. It was apprised that the SBP has conducted limited scope inspection of the matter and furnished its report to the Finance Division. It was observed that the overall increase in FX income of the banks was mainly driven by higher spreads due to heightened volatility, however. In some cases, the banks charged higher spreads. The SBP was in the process of imposing monetary penalties on the banks. It was also apprised that the SBP has initiated enforcement action against the banks involved in accordance with its supervisory framework.

Moreover, in order to ensure that the banks follow a reasonable and transparent approach in pricing their transactions and go improve the market conduct in future, the SBP held meetings with the banks and warned them about their practices and advised them to rationalise the spreads being charged to the customers. The committee sought report in black and white and decided to drop the agenda item.

While discussing the progress of EXIM bank, the SBP governor ensured that transaction will commence within 2 weeks, it was apprised that the bank has planned to start the operations in a three phased manner. In the first phase, the bank will introduce Export Credit Insurance products to the exporters. In the second phase, lending products and trade guarantee products will be introduced and in the final phase Islamic financing products.

It was apprised that currently, the SBP is engaged with EXIM Bank on the issues like deficiencies in existing IT infrastructure in terms of its integration, cyber security measures and absence of Core Banking System besides deployment on internal controls mechanism. The Secretary Finance said that the absence of the board of directors should not be a hindrance in commencing the transaction. The committee also regretted that as yet the ZBTL and the National Bank has not been appointed a President and wondered over the delay.

While discussing the matter of import of vintage cars still parked at dry port because the government was not giving clearance, it was apprised that the matter involved the requirements of IPO 2016, which fell in the domain of the Ministry of Commerce. The ministry might deem it appropriate to take up the matter with the federal cabinet for relaxation in the IPO.

The Senate Standing Committee on Finance and Revenue, in a report on the status of the budget recommendation of the Senate of Pakistan for the last five years (2018-2022), apprised the committee that during the tenure of Senator Farooq H Naek as the Chairman Committee (2018-2020), out of total 185 recommendations to the National Assembly, only 63 had been fully implemented. Similarly, in the tenure of Senator Muhammad Talha Mahmood (2021) 56 recommendations were totally implemented out of 136. In the fiscal year 2022, under Senator Saleem Mandiwalla’s chairmanship, 54 recommendations had been presented, out of which 25 were totally implemented.

Earlier, in the meeting, a detailed briefing was presented on crypto currency. The chairman committee remarked that there should not be an outright objection to the mechanism of crypto currency and it should be brought to the country’s advantage and regulated by drafting legislation.

Aisha Ghaus Pasha said that crypto currency was not a legal tender and the FATF was not in its favour. Dr Inayat Hussain said the rules of crypto were such that no government could control it. It was briefed that over 9 million people, which was around 4.1% of Pakistan’s population, own crypto currency and so far crypto exchange worth $20 billion had taken place. The SBP deputy governor said examining the models of other countries on the issue of crypto currency, 91 million users or Rs20 billion worth of crypto transactions was an exaggeration, he added.