Pakistan Latest Move To Please IMF May Take Loan Interest Rate Up To 19%

Islamabad:

Pakistan’s government has agreed to raise interest rates by two percent, or 200 basis points, from 17 percent to meet another condition set by the International Monetary Fund (IMF), The Express Tribune reported.

With the new decision, Pakistan has accepted another IMF precondition for the release of $1.1 billion in critical funds, part of the $6.5 billion bailout package, the report said, adding that Pakistan announced the rate hike based on interest rates the government set in the auction to absorb the domestic debt.

The Pakistani authorities’ decision will bring the interest rate down to 19 percent, just below the previous record of 19.5 percent set in October 1996, The Express Tribune reported.

Sources in Pakistan’s Treasury Ministry said that what was effectively a technical-level discussion had taken place between Islamabad and the IMF’s review mission.

The sources revealed that according to The Express Tribune’s report, there was an expectation that Pakistan would hike the interest rate by 2 percent. Sources said talks between the Pakistani government and IMF officials on some energy sector issues were in their final stages.

Earlier this month, the Pakistani government and IMF staff completed the ninth review of the $6.5 billion bailout without a staff-level agreement. The Pakistani government had hoped to be able to persuade the IMF to gradually implement the conditions.

However, Islamabad’s hopes were dashed during the IMF mission’s 10-day visit to Pakistan.

Amid an unprecedented economic crisis in the country, Pakistani Prime Minister Shehbaz Sharif ordered the foreign ministry to reduce the number of foreign missions as part of austerity measures, Geo News reported.

Prime Minister Shehbaz Sharif announced the decision on February 22.

“The Prime Minister is pleased to report that a well-considered proposal/plan in this regard can be positively presented to this office within two weeks,” read a policy from the Prime Minister’s Office.

Shehbaz has issued instructions to the State Department to cut a number of foreign missions abroad and cut their offices, staff and other spending-cutting measures by 15 percent, according to Geo News’ report.

According to the news report, the official memo, titled “Streamlining foreign missions abroad,” said the prime minister was pleased to form a National Savings Committee (NAC) in light of ongoing economic constraints and the consequent need for fiscal consolidation and balance of payments deficit control. .