Why Did India Decline To Vote For IMF's USD 1B Loan Aid To Pakistan?

(MENAFN- Live Mint) The International Monetary Fund (IMF) has completed the first review of Pakistan's economic reform program under the Extended Fund Facility (EFF), which allows for the disbursement of approximately USD 1 billion.

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However, India has strongly opposed the funding, arguing against providing support to a country that continues to sponsor cross-border terrorism. India warned that such assistance poses reputational risks for global institutions and undermines international norms.

In a post on X, the IMF said,“IMF Board approved the first review of Pakistan's economic reform program under the EFF, enabling a disbursement of ~ $1 billion, reflecting strong program implementation which has contributed to continuing economic recovery.”

This stand was taken during the International Monetary Fund's (IMF) review of a USD 1 billion Extended Fund Facility (EFF) and consideration of a fresh USD 1.3 billion Resilience and Sustainability Facility (RSF) for Pakistan, sources within the Government of India said.

Why did India abstain?

India firmly opposed funding a country that sponsors cross-border terrorism, warning that such support poses reputational risks for global institutions and undermines international norms.

This stand was taken during the International Monetary Fund's (IMF) review of a USD 1 billion Extended Fund Facility (EFF) and consideration of a fresh USD 1.3 billion Resilience and Sustainability Facility (RSF) for Pakistan, sources within the Government of India told ANI.

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India abstained from the recent IMF vote on approving a loan to Pakistan, not due to a lack of opposition, but because IMF rules do not permit a formal“no” vote, sources added, as reported by ANI.

Additionally, New Delhi expressed its strong objections to the limitations of the IMF's voting system, taking the opportunity to formally document its concerns. India's main objections included questioning the effectiveness of the ongoing IMF assistance, noting that Pakistan has received support in 28 of the past 35 years, including four programs in the last five years, yet without achieving meaningful or lasting reforms.

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India also highlighted the continued dominance of the Pakistani military in economic matters, which undermines transparency, civilian oversight, and sustainable reform.

On Wednesday, IMF reviewed the Extended Fund Facility (EFF) lending program of USD 1 billion and also considered a new Resilience and Sustainability Facility (RSF) lending program of USD 1.3 billion for Pakistan.

India raises concerns regarding Pakistan's 'state-sponsored terrorism'

In its official statement, India raised significant concerns regarding Pakistan's track record with previous IMF loans and the potential misuse of funds for "state-sponsored cross-border terrorism."

India's concerns extended beyond economic considerations to governance issues, particularly the role of Pakistan's military in economic affairs. The statement pointed out that“Pakistan military's deeply entrenched interference in economic affairs poses significant risks of policy slippages and reversal of reforms.”

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It referenced a 2021 UN report that described military-linked businesses as the "largest conglomerate in Pakistan" and noted the army's current leading role in Pakistan's Special Investment Facilitation Council.

The Ministry also noted that while several other member countries shared India's concerns about the potential misuse of international financial assistance,“the IMF response is circumscribed by procedural and technical formalities.” India characterised this as“a serious gap highlighting the urgent need to ensure that moral values are given appropriate consideration in the procedures followed by global financial institutions.”

How does IMF voting take place?

The IMF Executive Board is composed of 25 Directors who represent individual member countries or groups of countries. It is responsible for daily operational matters, including the approval of loans, ANI reported.

Unlike in the United Nations, where each country has one vote, the IMF voting power reflects the economic size of each member. For instance, countries like the United States hold a disproportionately high voting share.

Thus, to simplify things, the IMF typically makes decisions by consensus. In cases where a vote is required, the system does not allow a formal "no" vote. Directors can either vote in favour or abstain.

India firmly opposed funding a country that sponsors cross-border terrorism, warning that such support poses reputational risks for global institutions.

There is no provision to vote against a loan or proposal.

(With inputs from ANI)

Key Takeaways

• India's abstention reflects its stand against supporting nations involved in terrorism.
• Concerns over the effectiveness of IMF aid to Pakistan, which has not led to significant reforms.
• Highlighting governance issues related to military influence in Pakistan's economy.

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