India abstains from voting on IMF's $2.3 billion loan to Pakistan

The Indian side raised the possibility of the funds being used for terror activities; both countries are in a military stand-off after Pak-backed terrorists killed 26 civilians at Pahalgam in Jammu an

India on Friday abstained from voting on the International Monetary Fund (IMF) consideration of lending $2.3 billion to Pakistan, citing its "poor track record", and "the possibility of misuse of debt financing funds for state sponsored cross border terrorism".

 

"The International Monetary Fund (IMF) today reviewed the Extended Fund Facility (EFF) lending program ($1 billion) and also considered a fresh Resilience and Sustainability Facility (RSF) lending program ($1.3 billion) for Pakistan. 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 Indian side said.

 

India pointed out that inflows from financial institutions like IMF could be misused for military and state sponsored cross border terrorist purposes.

 

"While 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 IMF response is circumscribed by procedural and technical formalities. This is a serious gap highlighting the urgent need to ensure that moral values are given appropriate consideration in the procedures followed by global financial institutions," India said.

 

India's abstention comes amid escalating tensions between India and Pakistan following the Pahalgam terrorist attack that claimed the lives of 26 people on April 22. Subsequently, in the wee hours of May 7, India targeted nine terrorist sites in Pakistan and Pakistan-occupied Jammu & Kashmir. On May 8, Pakistan targeted 36 locations along India’s western border with drones in infiltration operations, which were shot down by the Indian forces.

 

India further voiced its concerns about Pakistan being a prolonged borrower from the IMF, with a very poor track record of implementation and of adherence to the IMF’s program conditions. Citing previous borrowings from IMF, India said, "Had the previous programs succeeded in putting in place a sound macroeconomic policy environment, Pakistan would not have approached the Fund for yet another bailout program."

Military's interference in economic affairs

India further elaborated its concerns about Pakistani military's interference in economic affairs that "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. In fact, a 2021 UN report 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 read.

 

Moreover, India also highlighted an IMF report 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," India said.