Days after International Monetary Fund (IMF) approved $1 billion bailout to Pakistan, it has raised concerns over the over the country’s reform programme, warning of increased “enterprise risks” due to escalating tensions with India.
The IMF has also flagged a potential “reputational risk” if there is a “perceived misuse” of its disbursement.
“Enterprise risks have increased. The rising tensions between India and Pakistan, if sustained or deteriorate further, could heighten enterprise risks to the fiscal, external and reform goals of the program. Reputational risks could also come from any perceived lack of evenhanded or if there was a perceived misuse of Fund disbursements,” the IMF staff country report cited.
“The IMF aid will be used to fund these terrorist organisations. Pakistan should not be given any financial aid, or it will fund terror. We want the IMF to think over again,” Rajnath Singh pointed out last week.
Also India abstained from voting in the Board meeting as it raised concerns over the efficacy of IMF programs for Pakistan given its “poor track record” and also on the possibility of “misuse of debt financing funds for state-sponsored cross-border terrorism”, according to an official release by the Ministry of Finance, Government of India released May 9.
In its report released by IMF mentioned that the Pakistani authorities have shown strong commitment towards the program that is “designed to help restore economic stability, build resilience through stronger reserve buffers, and advance reforms to create stronger and inclusive growth”.
The Washington-based multilateral institution clarified that the structure of the program is designed to curb any misallocation of funds by imposing strict limits on expenditure and reserve usage reports India Express.
"Disbursements under the EFF are dedicated to build reserves, adding the facility’s fiscal and reserve goals (including floors on social spending) limit the space for non-priority spending and the use of reserves to finance imports" the report read.
“Careful Fund communication will be essential to underscore the Fund’s neutral role and avoid misperceptions about its lending activities,” the Fund's report mentioned.
As part of the recently approved bailout package, the IMF has set out 11 new structural benchmarks for Pakistan. It further cautioned that “an intensification of political or social tensions” could also impact policy and reform implementation, in what was probably a reference to internal conflicts in Pakistan.
The International Monetary Fund (IMF) has imposed 11 new structural conditions on Pakistan as part of its ongoing bailout programme, cautioning that escalating tensions with India could jeopardize the plan’s fiscal, external, and reform targets.
As part of these conditions, Pakistan must secure parliamentary approval for a Rs 17.6 trillion budget for FY26 that aligns with IMF program goals by the end of June 2025.
Other major requirements include raising the debt servicing surcharge on electricity bills and lifting the ban on the import of used vehicles older than three years. The IMF emphasized that failure to meet these reforms especially amid regional or domestic instability could derail the implementation of its economic recovery agenda for Pakistan.
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