{"id":43178,"date":"2025-05-12T20:15:02","date_gmt":"2025-05-12T14:45:02","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=43178"},"modified":"2025-05-12T20:15:16","modified_gmt":"2025-05-12T14:45:16","slug":"imf-loan-to-pakistan","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/12-05-2025\/imf-loan-to-pakistan","title":{"rendered":"IMF Loan to Pakistan"},"content":{"rendered":"\n<p><strong>Syllabus: GS2\/ International Institutions<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>In News<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Executive Board of the International Monetary Fund (IMF) decided to allow for \u201can immediate disbursement\u201d of <strong>$1 billion (around Rs 8,500 crore) to Pakistan<\/strong>.\n<ul class=\"wp-block-list\">\n<li>This disbursal was done as part of <strong>IMF\u2019s Extended Fund Facility (EFF)<\/strong> to Pakistan.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What is the Extended Fund Facility (EFF)?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The <strong>Extended Fund Facility<\/strong> is a loan-based support mechanism provided by the IMF to countries that suffer from medium-term balance of payments problems, particularly due to structural deficiencies in their economies.\u00a0<\/li>\n\n\n\n<li>Unlike short-term bailouts, the EFF is designed to assist countries in implementing structural reforms that take time to yield results.<\/li>\n\n\n\n<li>According to the IMF, EFF loans:\n<ul class=\"wp-block-list\">\n<li>Offer longer repayment periods<\/li>\n\n\n\n<li>Support reforms in fiscal governance, banking, taxation, etc.<\/li>\n\n\n\n<li>Target countries with long-standing issues such as poor infrastructure, financial instability, or chronic budget deficits<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>It is <strong>not financial aid or a grant<\/strong>\u2014countries are expected to repay these funds along with agreed interest.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Resilience and Sustainability Facility (RSF)<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>It provides affordable, long-term financing to support low- and vulnerable middle-income countries in implementing macro-critical reforms to address balance of payments risks, particularly those related to climate change and pandemic preparedness.\u00a0<\/li>\n\n\n\n<li>It aims to strengthen macroeconomic resilience by supporting policy reforms that reduce these risks and enhance financial buffers.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Why does the IMF consider Pakistan for EFF Assistance?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Despite its strategic ambitions, Pakistan\u2019s economic fundamentals have steadily deteriorated over the past two decades.\n<ul class=\"wp-block-list\">\n<li><strong>Stagnant GDP: <\/strong>Pakistan\u2019s GDP in 2023 stood at $338 billion, lower than in 2017.<\/li>\n\n\n\n<li><strong>Rising Inflation:<\/strong> Double-digit inflation for five consecutive years\u2014culminating in 23.4% in 2024.<\/li>\n\n\n\n<li><strong>Debt Dependence:<\/strong> Pakistan has availed 28 IMF loans in 35 years and borrowed from China, UAE, Saudi Arabia, Paris Club, Islamic Development Bank, and others.<\/li>\n\n\n\n<li><strong>Weak Fundamentals: <\/strong>Low savings and investment, poor infrastructure, limited female workforce participation, and consistent fiscal mismanagement.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>According to the IMF, Pakistan\u2019s recent efforts under the EFF have shown signs of progress:\n<ul class=\"wp-block-list\">\n<li>Inflation dropped significantly to 0.3% in April 2025<\/li>\n\n\n\n<li>Increase in foreign exchange reserves<\/li>\n\n\n\n<li>Structural reforms like the Agricultural Income Tax and improved fiscal controls.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>India\u2019s Dissent: Strategic and Security Concerns<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>India formally conveyed its strong objections to the IMF Board regarding the disbursement, highlighting two major concerns:\n<ul class=\"wp-block-list\">\n<li><strong>Track Record of Misuse: <\/strong>India pointed to Pakistan\u2019s poor utilization of previous IMF loans, often failing to implement promised reforms or misallocating funds.<\/li>\n\n\n\n<li><strong>National Security Threats:<\/strong> Citing state-sponsored cross-border terrorism, India warned that the debt financing might be indirectly used to fund military or terror activities against India.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>While the IMF Executive Board does not allow member <strong>countries to vote \u201cagainst\u201d <\/strong>such proposals, India abstained from the decision as a diplomatic expression of protest.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background\" style=\"background-color:#fff2cc\"><tbody><tr><td><strong>About International Monetary Fund (IMF)<\/strong><br>&#8211; <strong>Introduction:\u00a0<\/strong><br>1. The IMF is a specialised agency of the United Nations, founded in 1944 at the Bretton Woods Conference.<br>2. It was created to ensure global monetary stability after the disruptions caused by the Great Depression and World War II.<br>&#8211; <strong>Objectives:<\/strong><br>1. Promote international monetary cooperation.<br>2. Ensure exchange rate stability and orderly currency arrangements.<br>3. Facilitate balanced growth of international trade.<br>&#8211; <strong>Functions:<\/strong><br>1. <strong>Economic Surveillance: <\/strong>Monitors global and country-specific economic trends and provides policy advice.<br>2. <strong>Financial Assistance: <\/strong>Offers loans to countries with balance of payments problems.<br>3. <strong>Technical Assistance and Capacity Development: <\/strong>Provides training and expertise in public finance, monetary policy, statistics, etc.<br>4. <strong>Conditionality: <\/strong>Loans are tied to economic reform programmes to ensure fiscal discipline and long-term stability.<br>&#8211; <strong>Membership and Voting Power:\u00a0<\/strong><br>1. It comprises 190 member countries. Each member contributes a quota (based on GDP and economic indicators), which determines:<br>(a). Voting power (formula: 1 vote per 100,000 SDRs + basic votes). (US has the highest share)<br>(b). Access to financial resources.<br>2. <strong>SDRs (Special Drawing Rights):<\/strong> An international reserve asset created by the IMF. Not a currency but can be exchanged for freely usable currencies like USD, EUR, JPY, GBP, and CNY.<br>&#8211; <strong>Organisational Structure:<\/strong>\u00a0<br>1. <strong>Board of Governors:<\/strong> Highest decision-making body; usually finance ministers or central bank governors of member countries.<br>2. <strong>Executive Board:<\/strong> 24-member board handling day-to-day operations.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><strong>Source: <\/strong><a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-economics\/imf-loan-to-pakistan-why-passed-9995800\/\" rel=\"nofollow noopener\" target=\"_blank\"><strong>IE<\/strong><\/a><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<h3><strong>In News<\/strong><\/h3>\n<li class=\"ms-5\">The Executive Board of the International Monetary Fund (IMF) decided to allow for \u201can immediate disbursement\u201d of $1 billion (around Rs 8,500 crore) to Pakistan.<\/li>\n<p><\/p>\n<h3><strong>What is the Extended Fund Facility (EFF)?<\/strong><\/h3>\n<li class=\"ms-5\">The Extended Fund Facility is a loan-based support mechanism provided by the IMF to countries that suffer from medium-term balance of payments problems, particularly due to structural deficiencies in their economies.\u00a0<\/li>\n<li class=\"ms-5\">Unlike short-term bailouts, the EFF is designed to assist countries in implementing structural reforms that take time to yield results.<\/li>\n<li class=\"ms-5\">According to the IMF, EFF loans:<\/li>\n<li style=\"margin-left:80px;\">Offer longer repayment periods<\/li>\n<li style=\"margin-left:80px;\">Support reforms in fiscal governance, banking, taxation, etc.<\/li>\n<li style=\"margin-left:80px;\">Target countries with long-standing issues such as poor infrastructure, financial instability, or chronic budget deficits<\/li>\n<p><a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/12-05-2025\/imf-loan-to-pakistan\" class=\"btn btn-primary btn-sm float-end\">Read More<\/a><\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-43178","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/43178","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=43178"}],"version-history":[{"count":2,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/43178\/revisions"}],"predecessor-version":[{"id":43199,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/43178\/revisions\/43199"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=43178"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=43178"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=43178"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}