Pakistan seeks IMF assistance
Bonds Lagarde warns debt transparency will be condition for helpBY STEVE GARTONPakistan formally approached
the IMF for assistance last
week, setting the scene for
a test of the Fund’s ability
to provide support without
escalating tensions between the
US and China, Pakistan’s most
important creditor.
Finance minister Asad Umar
and central bank governor
Tariq Bajwa met IMF managing
director Christine Lagarde in
Bali on Thursday to request
funding, ahead of what would
be Pakistan’s 13th programme
since 1980.
Lagarde said in a statement
an IMF team would visit
Islamabad “in the coming
weeks” to discuss a possible
programme.
Analysts expect a financing
to reach as much as US$12bn,
Pakistan’s biggest so far, but
warn that any package would
require months of delicate
negotiations, dampening the
immediate impact on thecountry’s sovereign bonds.
Pakistan’s closely managed
currency slid 7% on Monday
after ministers first announcedplans to seek IMF help.
Speaking before the formal
request, Lagarde said the Fund
was ready to assist any of its189 members, but cautioned
that officials would need
“absolute transparency about
the nature, size, terms of theNews
India cushions shadow banks
Bonds SBI to buy NBFC assets, regulator increases refinancing limitBY KRISHNA MERCHANTIndia’s largest state-owned
bank and the regulator for
mortgage finance companies
have moved to ease concerns
over liquidity at the country’s
shadow banks, following the
central bank’s announcement
of a crackdown on the non-
banking financial sector.
Housing finance companies
expect the measures to boost
confidence in the market for
short-term debt, which was
left reeling from a series of
defaults in recent weeks by
Infrastructure Leasing and
Financial Services.
STATE BANK OF INDIA said last
Tuesday that it was stepping
up its target to buy “goodquality” asset portfolios
from non-banking financial
companies this year to
Rs450bn (US$6.1bn) from
Rs150bn.
“This measure should
alleviate liquidity concerns to a
great extent,” Economic Affairs
Secretary Subhash Chandra
Garg said on Twitter.
The SBI announcement came
after the National Housing
Bank, the regulator for
mortgage finance companies,
last Monday increased its
refinancing limit to Rs300bn
for the year to June 2019,
from Rs240bn previously, to
ensure that credit flows to the
housing finance sector. NHB
said Rs88bn of the quota has
already been allocated.SBI and NHB have “given a
strong signal that there is no
dearth of liquidity for HFCs as
they underwrite high-quality
loans which can be refinanced
with the regulator or sold
down to banks,” said Ajit
Mittal, executive director at
Indiabulls Housing Finance.
In the aftermath of the
IL&FS default, housing finance
company paper has sold
at distorted prices. “Fresh
subscriptions to commercial
papers and secondary market
activity stopped because
mutual funds which were
subscribers to such paper
became jittery,” leading to a
tightening of liquidity in the
NBFC sector in the past two
weeks, Mittal said.TIGHTER RULES
The Reserve Bank of India said
on October 5 that it planned
to tighten asset/liability
management rules for NBFCs
after the government seized
control of IL&FS.
“RBI is looking at
strengthening the ALM
guidelines to avoid rollover
risks,” said N S Vishwanathan,
deputy governor of the Reserve
Bank of India.
IL&FS was funding long-term
infrastructure projects with
short-term debt, which led
to a significant asset-liability
mismatch, delayed projects and
the associated cashflows, and
hindered its ability to repay
debt.
This kind of asset-liability
mismatch has been especially
acute for NBFCs in the
infrastructure and housing
finance sectors. Besides the
tighter scrutiny on ALM,