Asad Umar says IMF proposed 600bps interest rate hike

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ISLAMABAD: Former finance minister Asad Umar said on Monday that the IMF deal is less stringent than the one the money lender offered a few months after the new government came into power.

The former finance minister was addressing a gathering at T2F cafe titled ‘IMF & the Economic Future of Pakistan’.

“The conditions were tougher when we first met,” he said.

Umar said that there was a general consensus among government officials that the IMF was the only option.

“This could have been due to the fact that previous governments had always gone to the money lender,” he said.

He said that Pakistan had never faced such a balance of payments crisis before. He said that the PTI government had done exactly what it had claimed even before coming to power–that it would explore all options.

Umar said that he spoke to an IMF official just 10 days after taking oath. He said that only options had been discussed during his telephonic conversation with the official.

He said that Pakistan was trying to explore other options at a time when the US was saying that it would not give loans to Pakistan to pay off the Chinese debt.

“The prime minister went to China, Saudi Arabia and other friendly countries to secure aid, which he was successful in,” he said.

Umar revealed that the IMF had demanded prior action of 600 basis points increase in the interest rate.

He said that IMF was of the view that the discount rate should go up by 21 to 22 per cent.

“When Ishaq Dar assumed office, he had seven months of reserves to finance the current account,” he said. “When I took oath, we had just three months reserves. Dar had even then gone to the IMF,” he added.

Three months before I took charge, Pakistan had an average current account deficit of $2.03 billion a month, an annualised pace of $24.5 billion. In my last three months it was $636 million a month, an annualised pace of $7.5 billion, he said.