India raises concerns over IMF's bailout for Pak, flags possible use of funds for cross-border terrorism

At a key executive board meeting of multilateral lender International Monetary Fund (IMF) on Friday, India raised serious concerns over Pakistan's poor record and the possibility that the country could be misusing the funds for "state-sponsored cross border terrorism". The IMF was conducting a scheduled review of its Extended Fund Facility (EFF) lending programme to the tune of $1 billion and considering fresh lending of $1.3 billion under its Resilience and Sustainability Facility (RSF) for Pakistan. The development assumes significance as the Indian Armed Forces have been intercepting Pakistani military's violations on Indian soil with its attempts to target several Indian cities blocked and responded to swiftly by the Indian Armed Forces.

The programme is critical for Pakistan. India has already urged the IMF to review its loan facilities to Pakistan. 

India voiced its concerns about the possibility of terror funding using the funds given the neighbour's poor track record. 

"As an active and responsible member country, India raised concerns over the efficacy of IMF programs in case of Pakistan given its poor track record, and also on the possibility of misuse of debt financing funds for state sponsored cross border terrorism," read a Ministry of Finance statement. 

Such a track record "calls into question either the effectiveness of the IMF program designs in case of Pakistan or their monitoring or their implementation by Pakistan", it added. 

Meanwhile, blackouts were imposed in several Indian cities including Akhnoor, Samba, Samba, Rajouri and Ferozepur on Friday, and explosions heard in Samba, Nagrota and Rajouri. The Indian Armed Forces continued to neutralise much of Pakistani military's border violations effectively. 

Pakistan, a long-time IMF borrower | A 35-year history 

In the 35 years since 1989, Pakistan has had disbursements from the IMF in 28 years.

In the last five years, since 2019, there have been four IMF programs for Pakistan.

"Had the previous programs succeeded in putting in place a sound macro-economic policy environment, Pakistan would not have approached the Fund for yet another bail-out program," noted the statement.

Pakistan military’s deeply entrenched interference in economic affairs poses significant risks of policy slippages and reversal of reforms, said the ministry, stating that even when a civilian government is in power in Pak now, its army continues to play an outsised role in domestic politics and extends its tentacles deep into the economy.

A 2021 UN report described military-linked businesses as the “largest conglomerate in Pakistan”, and the situation has not changed for the better, it noted.

While the concern that fungible inflows from international financial institutions, like IMF, could be misused for military and state sponsored cross border terrorist purposes resonated with several member countries, the IMF response is circumscribed by procedural and technical formalities.