EDITORIAL: Finance Minister Miftah Ismail has refuted reports that the International Monetary Fund (IMF) programme is not on track due to its reported concerns over the recent amendments to the National Accountability Bureau (NAB) law passed by the National Assembly, adding that there is “no truth” to them.
Those who reject this concern outright need reminding that the IMF in 2018 adopted a new framework for enhanced engagement on governance that aims to “promote more systematic, effective, candid and evenhanded engagements with member countries regarding governance vulnerabilities — including corruption — that are critical to macroeconomic performance.
The policy focuses on state functions that are most relevant to economic activity, namely (i) fiscal governance; (ii) financial sector oversight; (iii) central bank governance and operations; (iv) market regulation; (v) rule of law; and (vi) anti-money laundering and combatting financial terrorism (AML/CFT).” In addition, the Fund notes that “the Financial Action Task Force (FATF), a 39-member inter-governmental body established by the 1989 G7 summit, has primary responsibility for developing worldwide standards for AML/CFT.
It works in close cooperation with other international organisations, including the IMF.” In other words, the Fund’s mandate includes engagement on the issue of corruption and one has to only look at documents uploaded on the Fund website on the ongoing 6 billion dollar Extended Fund Facility (EFF) programme to come to that conclusion.
The Memorandum of Economic and Financial Policies (MEFP) of the sixth mandatory review uploaded on the IMF website in February 2022 notes in considerable detail in para 18 that: “we remain committed to the full completion of the AML/CFT action plans…we continue to advance in addressing the strategic deficiencies identified by the 2019 Mutual Evaluation report of the Asia Pacific Group on Money Laundering.
We established a Secretariat to centralise and coordinate efforts across agencies to strengthen the AML/CFT regime…we are on track to meet the timelines for the implementation of our 2021 action plan including on the mutual legal assistance framework, AML/CFT supervisions, transparency of beneficial ownership information, and compliance with targeted financial sanctions for proliferation financing.”
There is no truth to the claim that recent NAB law changes compromise the pledge made by the previous government in the MEFP given that there are other relevant institutions, especially the FIA (Federal Investigation Agency) that is empowered to undertake these very functions.
It is important to note that the Finance Minister has, to his credit, successfully spread the perception that the staff-level agreement on the seventh/eighth review is imminent — a success amply reflected by the strengthening of the Pakistani rupee. Today, the country is desperately in need of revitalizing the IMF programme, not so much for the actual tranche release, but for generating a comfort level within the domestic and foreign markets that the country remains embarked on a reform agenda with markedly reduced risks of default.
The domestic currency market has already begun to respond favourably to these rumours and once the Fund’s Board accords approval to the tranche release the rating agencies would improve our outlook with a consequent reduction in the cost of borrowing externally.
Critics, both politicians as well as economists, are raising queries about the delay in reaching the staff-level agreement. Ministry of Finance officials informed this newspaper that all relevant paragraphs in the draft Memorandum of Economic & Financial Policies (MEFP) received from the Fund have been forwarded to relevant ministries/departments, including the Power Division, Federal Board of Revenue, the Privatisation Commission and state-owned entities for their acceptance/comments which are awaited as their input has not been received yet.
Once the input is received one may assume it would be discussed and consolidated and onsent to the Fund for its review, which may either prolong the process of negotiations if the Fund’s key conditions have not been met or else the review talks are declared to be successfully completed.
At present, it is fairly evident that electricity tariffs, prices of petroleum and products as well as taxes approved in the budget fulfil IMF’s prior conditions. The monetary policy conditions with respect to the policy rate would be revealed on 7 July when the Monetary Policy Committee meeting is scheduled. Thus the delay maybe in days or weeks not months anymore.
Copyright Business Recorder, 2022s
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