India has launched a vehement attack on Pakistan, which runs its country on loans from the International Monetary Fund (IMF). Adopting a firm stance on the IMF's bailout package to Pakistan, India has called for 'strict monitoring' of the financial aid. The IMF has been alerted by India that nations should not use such funds for defense spending or paying off other countries' debts.
Last July, the Fund provided Pakistan with a $3 billion short-term Stand-By Arrangement (SBA) to assist countries facing serious financial crises, granted on a temporary basis.
During the review of this loan, India's executive director at the IMF, Krishnamurthy Subramanian, presented India's perspective to the IMF's Executive Board. India generally stays away from Pakistan's loan requests from the IMF. India had done the same when the SBA was approved last July.
'Strict monitoring of loans given to Pakistan is necessary'
In January, when the IMF Board reviewed the loans given to Pakistan, India's representative had abstained from voting, following which the IMF released a $700 million installment to Pakistan.
This time, however, the Indian government has requested Krishnamurthy Subramanian to inform the IMF Board about how Pakistan is utilizing the loan received and to 'establish control and balance and ensure strict monitoring.'
According to a report by The Hindu, India urged the IMF Executive Board that such oversight is essential to ensure the funds meant for development needs are not diverted to defense costs and paying off the debts of other countries.
India's remarks before the IMF Executive Board are significant as Pakistan's new government under Prime Minister Shehbaz Sharif is engaged in 'urgent talks' with the IMF for additional loans, including the remaining $1.2 billion under the SBA.
Last June, Pakistan was grappling with a severe foreign exchange crisis, with its reserves dwindling to $3.5 billion – only enough to import essential goods for one month. The IMF loan had then helped Pakistan recover.
Pakistan's economy received a major blow in 2022 from devastating floods, debt, and soaring inflation, shrinking its economy in 2022-23, which has yet to recover.
How much foreign currency does Pakistan currently have?
By February, Pakistan's foreign currency reserves improved slightly to $8 billion but are only sufficient for six weeks of imports.
After last month's general election results, Moody's Investors Service acknowledged that Pakistan would need substantial external loans at least until 2026-27. This indicates that despite borrowing from the IMF, Pakistan will require loans for a prolonged period.
