New Delhi: The International Monetary Fund (IMF) Friday approved the sanction of $2.3 billion to Pakistan. India abstained from the vote, citing financing for cross-border terrorism.
Of the $2.3 billion, IMF approved the immediate disbursement of $1 billion to Pakistan under the ongoing Extended Fund Facility (EFF) lending program, and considered a fresh Resilience and Sustainability Facility (RSF) lending program ($1.3 billion).
A PTI report quoting the Pakistan Prime Minister’s Office said Prime Minister Shehbaz Sharif “expressed satisfaction over the approval of a USD 1bn dollar instalment for Pakistan by the IMF and the failure of India’s high-handed tactics against it”.
For the Pakistani economy, the IMF bailout is key to its economy. In the week ending 25 April, Pakistan’s total foreign exchange reserves stood at $15.25 billion. In 2023 it received emergency funding of $3 billion from the IMF for nine months as its inflation hit over 35 percent. It’s economic consolidation over the last year has been impacted by the current tensions, with the credit rating agency Moody’s Rating warning against any sustained escalation between India and Pakistan.
India’s Ministry of Finance, meanwhile, in a statement said: “As an active and responsible member country, India raised concerns over the efficacy of IMF programs in case of Pakistan given its poor track record, and also on the possibility of misuse of debt financing funds for state sponsored cross border terrorism.”
The statement added that the Pakistan military’s “deeply entrenched interference in economic affairs poses significant risks of policy slippages and reversal of reforms. Even when a civilian government is in power now, the army continues to play an outsized role in domestic politics and extends its tentacles deep into the economy”.
It said, “India flagged the Pakistan chapter of the IMF Report on Evaluation of Prolonged Use of IMF Resources. The report noted that there was a widespread perception that political considerations have an important role to play in the IMF lending to Pakistan. As a result of repeated bailouts, Pakistan’s debt burden is very high, which paradoxically makes it a too big to fail debtor for the IMF.”
Funding amid conflict with India
The vote for releasing the next tranche of Pakistan’s financing comes amid escalating tensions with India. On 7 May, India struck at nine terrorist complexes in Pakistan during Operation Sindoor. The operation was in response to the Pahalgam terrorist attack which left 26 tourists dead, including 25 Indians and one foreign national.
Since Operation Sindoor, Pakistan has increased the intensity of cross-border shelling and has for three nights in a row sent drones across northern and western India.
The vote in the IMF is significant given that the Pakistani economy has received four bailouts in the last five years.
“Had the previous programs succeeded in putting in place a sound macro-economic policy environment, Pakistan would not have approached the Fund for yet another bail-out program,” the Ministry of Finance said.
The statement added: “India pointed out that rewarding continued sponsorship of cross-border terrorism sends a dangerous message to the global community, exposes funding agencies and donors to reputational risks, and makes a mockery of global values.”
(Edited by Priyanjali Mitra)
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