ECONOMYNEXT – India has slammed the International Monetary Fund over its latest loan to Pakistan as hostilities broke out following a massacre of Indian civilians by an allegedly Pakistan backed group.
Pakistan cleared the first review of the latest IMF program (there have been 25 so far) and approved a fresh one which gives the country access to another 1.4 billion US dollars.
India said it abstained from voting at the IMF board review.
“In the 35 years since 1989, Pakistan has had disbursements from the IMF in 28 years,” India’s Finance Ministry said in a statement.
“In the last 5 years since 2019, there have been 4 IMF programs.
“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.
“India pointed out that 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.”
In Sri Lanka also concerns have been raised over IMF technical advice which have been blamed by some analysts on railroading the credit system into back-to-back currency crises due to severely flawed central bank operating frameworks with extreme anchor-conflicts.
Analysts have pointed out that the latest in-vogue statistical operating framework (data driven monetary policy) prescribed to central banks that trigger monetary troubles reject economic principles and laws of nature discovered and clearly explained by the classical economists in toto.
India and Pakistan at the moment however is locked in hostilities after India retaliated against the latest massacre of Indian civilians by an armed group that came across the border.
India said Pakistan’s army is interfering in economic matters which is a significant risk and suggested that IMF funds could be used for military purposes.
“Pakistan military’s deeply entrenched interference in economic affairs poses significant risks of policy slippages and reversal of reforms,” India’s statement said.
“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’s stand in the IMF
The International Monetary Fund (IMF) today reviewed the Extended Fund Facility (EFF) lending program ($1 billion) and also considered a fresh Resilience and Sustainability Facility (RSF) lending program ($1.3 billion) for Pakistan.
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.
Pakistan has been a prolonged borrower from the IMF, with a very poor track record of implementation and of adherence to the IMF’s program conditions.
Pakistan 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 that there was a widespread perception that political considerations have an important role to play 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.
India pointed out that rewarding continued sponsorship of cross-border terrorism sends a dangerous message to the global community, exposes funding agencies and donors to reputational risks, and makes a mockery of global values. 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.
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.
The IMF took note of the India’s statements and its abstention from the vote.
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