IMF Loan
As Pakistan seeks a new IMF loan program to address its financing needs of $6-8 billion, India has attempted to block the facility for Islamabad. India’s nominee, executive director Krishnamurthy Subramanian, has called for “stringent monitoring” of any emergency funds provided to Pakistan during a review of its ongoing $3 billion short-term Stand-By Arrangement (SBA).
While India has historically abstained from voting on loans sought by Pakistan, this time, Subramanian conveyed the need for checks and balances and strict monitoring of Pakistan’s utilization of IMF funds.
He emphasized the importance of ensuring that funds intended for development are not diverted towards defense spending or repayment of external debt to third countries.
The IMF’s 24-member Executive Board holds the final decision on loans after reaching an agreement with the country seeking financial assistance.
Executive Board members have voting rights based on special drawing rights (SDR), with larger economies having greater weightage. India, with 3.05% of votes, cannot unilaterally block Pakistan’s loan unless it mobilizes support within the IMF board.
Pakistan’s financing needs are estimated between $6-8 billion, with significant debt servicing obligations before the fiscal year-end in June.
The country must pay $6 billion in debt servicing, including a major payment in April when dollar bonds mature.
Moody’s assessment suggests that Pakistan can meet external payment challenges until June 2024 but faces uncertainty in meeting large financing needs thereafter.
India’s attempt to influence the monitoring of IMF funds for Pakistan introduces a geopolitical dimension to financial assistance considerations, complicating the dynamics between the two neighboring countries within the international financial framework.
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