India Abstains from IMF Vote on Funding Pakistan

India Abstains from IMF Vote on Funding Pakistan

Why in the News ?

India abstained from voting on the IMF’s decision to extend additional funding to Pakistan. The Indian government raised concerns over Pakistan’s poor track record with IMF loans and potential misuse of funds for cross-border terrorism.

India Abstains from IMF Vote on Funding Pakistan

About India’s Stance:

  • India raised concerns about Pakistan’s poor track record with IMF programs, citing its failure to adhere to program conditions.
  • India abstained from the IMF vote on granting Pakistan $1 billion from the Extended Fund Facility (EFF) and $1.3 billion from the Resilience and Sustainability Facility (RSF).

  • India’s Ministry of Finance pointed out that Pakistan has been a prolonged borrower and has received IMF assistance in 28 out of 35 years since 1989.

Congress Criticism:

  • The Congress criticized the Indian government for not voting against the IMF funding.
  • Congress leader Jairam Ramesh accused the government of being hesitant, stating that a strong “NO” would have sent a more powerful message.

Pakistan’s IMF Dependency:

  • Pakistan has availed 24 loan facilities from the IMF since 1958, with the recent RSF being the 25th.

  • India highlighted that Pakistan’s debt situation was growing, making it difficult for the IMF to allow Pakistan to fail.

About Extended Fund Facility (EFF):

●     Purpose: Provides financial assistance to countries with medium-term balance of payments problems due to structural impediments or slow growth.

●     Eligibility: Available to all IMF member countries with external financing needs, used by advanced and emerging economies.

●     Conditionality: Countries must commit to structural reforms to maintain macroeconomic stability.

●     Disbursement: Funds released in phases, not in full at once, after IMF approval.

Resilience and Sustainability Facility (RSF):

●     Purpose: Provides affordable, long-term financing to low and vulnerable middle-income countries to enhance macroeconomic resilience.

●     Eligibility: Low-income countries, small states, and middle-income countries with specific income criteria.

●     Conditionality: Disbursements tied to completion of specific reform measures.

This decision underscores India’s concerns regarding Pakistan’s ongoing economic instability and its potential misuse of international financial aid.