India’s stand vindicated as Pakistan fails to meet IMF loan conditions again

New Delhi, Aug 13 With Pakistan failing to meet three out of the five targets fixed by the International Monetary Fund for the second review of the $7 billion bailout package, India’s stand has been vindicated that Islamabad has been a prolonged borrower, with a very poor track record of implementation and adherence to the IMF's programme conditions

Pakistan’s Federal Board of Revenue missed two major fiscal targets as it failed to collect 12.3 lakh crore rupees in total revenues and generate 50 billion rupees under the much-hyped Tajir Dost Scheme aimed at taxing retailers. The scheme is reported to have turned out to be a dud, leaving the unorganised economy unchecked, according to a report in Pakistan’s Express Tribune newspaper.

The fiscal operations summary released by Pakistan’s Ministry of Finance also shows that the provinces fell short of saving the targeted 1.2 lakh crore rupees in the last fiscal year, which ended in June, due to higher expenditures.

India has opposed the loans as inflows from international financial institutions, like the IMF, could be misused by Pakistan for military and state-sponsored cross-border terrorist activities. However, the IMF’s response is circumscribed by procedural and technical formalities.

“This is a serious gap highlighting the urgent need to ensure that moral values are given appropriate consideration in the procedures followed by global financial institutions,” India’s representative Parameswaran Iyer said at the last meeting of the IMF.

Last September, the Executive Board of the IMF approved a 37-month Extended Arrangement under the EFF for Pakistan in the amount of SDR 5,320 million (or around $7 billion). While there was an immediate disbursement of $1 billion, the meeting on Friday was called to review the funding programme for Pakistan.

He highlighted that Pakistan has been a prolonged borrower from the IMF, with a very poor track record of implementation and adherence to the IMF’s programme conditions.

India has highlighted that had the previous programmes succeeded in putting in place a sound macroeconomic policy environment, Pakistan would not have approached the Fund for yet another bailout. Such a track record calls into question either the effectiveness of the IMF programme designs in the case of Pakistan or their monitoring or their implementation by Pakistan.

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

In fact, a 2021 UN report described military-linked businesses as the “largest conglomerate in Pakistan”. The situation has not changed for the better; rather, the Pakistan Army now plays a leading role in the Special Investment Facilitation Council of Pakistan.

India flagged the Pakistan chapter of the IMF Report on Evaluation of Prolonged Use of IMF Resources. The report noted a widespread perception that political considerations have an important role in the IMF lending to Pakistan. As a result of repeated bailouts, Pakistan’s debt burden is very high, which paradoxically makes it a too-big-to-fail debtor for the IMF.

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