Following the heightened tensions after the Pahalgam Terror Attack between India and Pakistan, a ceasefire has now been established. While both nations engaged in cross-border attacks, the International Monetary Fund (IMF) approved a $1 billion loan to a nation sheltering terrorism, facing global backlash. Now, it seems they have caught onto Pakistan's pattern and have imposed 11 new conditions before releasing the next tranche of the bailout.
'Fulfill the conditions, or the next tranche remains withheld...'
Amidst India-Pakistan tensions, after providing a hefty loan to Pakistan, the IMF appears concerned about financial risks. According to a PTI report, this concern has led to 11 additional conditions on Pakistan to secure the next tranche of their bailout package, bringing Pakistan's total conditions to 50. IMF has clearly stated that without meeting these requirements, the next installment will cease.
Support Amidst Indo-Pak Conflict
When Indian and Pakistani forces faced off at the border, with both launching drone and missile attacks, the IMF approved a nearly $1 billion installment under the existing Extended Fund Facility for Pakistan. Additionally, the IMF sanctioned another $1.4 billion for Pakistan's Climate Resilience Loan. This totals IMF's assistance to Pakistan at $2.4 billion, sparking global outrage against the IMF.
Source: aajtak
Impact of Conditions on Pakistan
Looking at the IMF's new terms for Pakistan, they include the approval of a federal budget of 17.6 trillion Pakistani rupees by parliament, and the imposition of high surcharges on electricity bills. Current import regulations allow only cars up to 3 years old; this should extend to 5 years. Furthermore, the government must develop a roadmap to phase out incentives for Special Tech Zones and Industrial Parks by 2035. The report is due by year's end.
Key Energy Sector Conditions
Issue annual electricity charge adjustment notification by July 1, 2025.
Adjust semi-annual gas tariff by February 15, 2026.
Enact permanent law for captive power levy ordinance by May's end.
Lift the Rs. 3.21 per unit limit on the Debt Service Surcharge by June's end.
Align Budget with IMF Goals
According to IMF reports, Pakistan's estimated defense budget is 2,414 billion rupees, a 12% increase from last year. However, Shahbaz Sharif's government recently proposed a rise to 2,500 billion rupees, an 18% growth, conflicting with IMF's fiscal balance goals. By June 2025, the IMF expects parliament to pass the 2026 budget in line with its targets.
Source: aajtak
Warning Issued to PAK
The Express Tribune has reported that alongside implementing 11 new conditions, the IMF has issued a stern warning to Pakistan. Continued or escalated tensions between India and Pakistan could amplify risks to the program's fiscal, external, and reform objectives. This warning comes in light of India's Operation Sindoor post-Pahalgam attack.
Following the tragic Pahalgam attack, which claimed 26 tourists, India launched retaliatory air strikes under this operation, reportedly killing over 100 terrorists. Consequently, on May 10, both countries agreed to a ceasefire.
