Pakistan wants IMF to separate FATF from programme.

ISLAMABAD -- Pakistan has asked the International Monetary Fund (IMF) to relax conditionalities under the $6 billion Extended Fund Facility (EFF) relating to the Financial Action Task Force (FATF) and issuance of sovereign guarantees to help raise over $4bn from domestic and international markets.

Pakistan has budgeted about $3bn bonds (about Rs450bn) - Islamic Sukuk and Eurobond - to be launched in the international capital markets during the current fiscal year to meet targets under the EFF for foreign inflows. Separately, the government has planned to raise about Rs200bn from domestic Islamic banks for the power sector to scale down circular debt.

'We are dying to complete these transactions at the earliest,' a senior official told Dawn, adding that the capital market conditions were never as conducive as at present. He said the return on bonds had plummeted to almost zero in the international capital markets and investors were finding it hard to secure profits on secured papers. 'This provides an ideal opportunity for Pakistan to tap international capital markets to secure sovereign bonds at a minimal interest rate,' the official said.

Pakistan had last tapped the international capital markets in 2016 at about 8.25 per cent mark-up when average yield hovered between 3pc and 5pc for other countries.

Likewise, the government had negotiated Islamic financing worth around Rs200bn for the power sector from domestic banks in recent months on top of another Rs200bn secured earlier this year.

Asks Fund to allow issuance of sovereign guarantees to raise over $4bn through bonds

But all these transactions are handicapped by the IMF conditionalities as part of the 39-month EFF. One of the structural benchmarks under the IMF programme is for Pakistan to 'adopt measures to strengthen the effectiveness of AML/CFT (anti-money laundering/combating the financing of terrorism) framework to support the country's efforts to exit the FATF list of jurisdictions with serious deficiencies' by the end of October 2019.

Likewise, one of the six performance criteria under the IMF programme for Pakistan is to have a 'ceiling on the amount of government guarantees' to the extent of Rs1.6 trillion throughout the current year i.e. until end-June 2020.

The official said the finance ministry had already taken up the matter of separating the FATF from the IMF-supported economic programme on the sidelines of recent IMF/World Bank meetings in Washington. The Pakistani...