The International Monetary Fund (IMF) cleared a $1-billion tranche for Pakistan as part of its $7-billion Extended Fund Facility (EFF) lending program and $1.3 billion tranche under the Resilience and Sustainability Facility (RSF) in its board meeting held Friday. India abstained from voting in the meeting as it raised concerns over the efficacy of IMF programmes for Pakistan given its “poor track record” and also on the possibility of “misuse of debt financing funds for state-sponsored cross-border terrorism”, an official release by the Ministry of Finance, Government of India said.
India conveyed its “strong dissent” as the IMF reviewed the Extended Fund Facility (EFF) lending program ($1 billion) and also considered a fresh Resilience and Sustainability Facility (RSF) lending programme ($1.3 billion) for Pakistan. Reuters quoted Pakistan government’s statement to say that the IMF has freed $1 billion in cash after the first review of the $7 billion programme for Pakistan. The review approval brings disbursements to $2 billion within the $7 billion programme.
The concern that fungible inflows from international financial institutions, like IMF, could be misused for military and state-sponsored cross-border terrorist purposes resonated with several member countries, the statement said.
Opposition parties, however, questioned India’s abstention from voting in the IMF board meeting. Congress MP Jairam Ramesh said the Congress party had on April 29 demanded that India vote against the IMF loan to Pakistan in the IMF board meeting. “India has only abstained from the vote. The Modi Government has chickened out. A strong NO would have sent a powerful signal,” he said.
Government of India sources, however, said that the IMF rules do not permit a formal “no” vote, with the IMF typically resorting to consensus for decisions. Each country of the 25-member IMF board has a vote but it is linked to the country’s economic size. In cases where a vote is required, the system does not allow a formal “no” vote. “Directors can either vote in favour or abstain. There is no provision to vote against a loan or proposal,” a source said.
India opposed the frequent bailouts to Pakistan in the IMF board meeting, pointing out that such a track record calls into question either the effectiveness of the IMF programme designs for Pakistan or their monitoring or their implementation by Pakistan. “As an active and responsible member country, India raised concerns over the efficacy of IMF programmes 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. Pakistan has been a prolonged borrower from the IMF, with a very poor track record of implementation and of adherence to the IMF’s program conditions,” the Finance Ministry statement said.
The Indian government also underlined that Pakistan has had disbursements from the IMF in 28 years in the 35 years since 1989, with four IMF programmes in the last five years since 2019. “Had the previous programmes succeeded in putting in place a sound macroeconomic policy environment, Pakistan would not have approached the Fund for yet another bailout programme. India pointed out that such a track record calls into question either the effectiveness of the IMF program designs in case of Pakistan or their monitoring or their implementation by Pakistan,” it said.
Story continues below this ad
The Indian government also pointed out that 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.
Citing a UN report from 2021, the Indian government described military-linked businesses as the “largest conglomerate in Pakistan”. “The situation has not changed for the better; rather the Pakistan Army now plays a leading role in the Special Investment Facilitation Council of Pakistan,” the statement said.
India flagged the Pakistan chapter of the IMF Report on Evaluation of Prolonged Use of IMF Resources that 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,” the statement said.
On Thursday, India’s Foreign Secretary Vikram Misri had said that the Fund’s Board should look “deep within” and take into account the facts before generously bailing out the country.
Story continues below this ad
The IMF is financing a $7-billion aid package to Islamabad that was approved in September 2024. The ongoing 37-month long Extended Fund Facility programme of the IMF consists of six reviews over the span of the bailout.
