Why Delhi couldn’t stop the IMF rescue in Islamabad

Last week, the International Monetary Fund (IMF) approved $ 1 billion in Pakistan (756 million pounds)-crossing that attracted a sharp dissatisfaction with India as military military action between nuclear armed neighbors before A. Ceasefire under the guidance of the US was unexpectedly recognized.

Despite the protests of India, the IMF Council approved a $ 7 billion loan, saying that Islamabad demonstrated a strong implementation of the program, which led to a constant economic recovery in Pakistan.

It also states that the fund will continue to support Pakistan’s efforts in creating economic resistance to “climatic vulnerabilities and natural disasters”, providing further access to about $ 1.4 billion in the future.

In a strongly formulated statement India has caused concern about the decision, citing two reasons.

Delhi questioned the “efficiency” of such rescue or absence, given the “bad results” of Pakistan in implementing reform measures. But more importantly, this has stated the possibility of using these funds for “state cross-border terrorism”-the accurate Islamabad repeatedly denied-and stated that the IMF exposes itself and donor “reputational risks” and creating “mockery of global values”.

The IMF did not respond to the BBC request for a commentary on Indian position.

Even Pakistani experts claim that Delhi’s first argument has some merits. Pakistan has been prone to urgently seek the help of the IMF – rescued 24 times since 1958 – without significant reforms to improve public administration.

“Transition to the IMF is like going to the intensive care department (intensive therapy). If the patient goes 24 or 25 times to the intensive care unit, that is, the structural problems and problems that need to be addressed,” said Hussain Haqqani, a former Pakistan Ambassador to the US.

But referring to other Delhi-IMF problems, the IMF “rewards sponsorship support for cross-border terrorism”, thus sending “a dangerous message to the world community” is more difficult, and perhaps explaining why India could not put pressure to stop salvation.

Experts say. According to the country’s own observations, the fund had a limited ability to do something with the loan, and was “described by procedural and technical formalities”.

As one of the 25 members of the IMF Council, the influence of India is limited in the fund. It is four countries, including Sri Lanka, Bangladesh and Butane. Pakistan is part of the Central Asia group presented by Iran.

Unlike the UN system, “one of the countries”, the rights of the IMF Council members are based on the country’s economic size and its contribution system, which is increasingly criticized for contributing to more richer Western countries in the development of economies.

For example, in the US the largest share for voting – 16.49% – while India has only 2.6%. In addition, the IMF rules do not allow to vote against the proposals – the board members can either vote for or refrain – and decisions are made within the Council.

“It shows how the interests of powerful countries can influence the decisions,” said an economist who did not want to speak on the BBC record.

The decision of this imbalance was a key proposal in reforms that were intended for the IMF and other multilateral creditors during the G20 presidency in India in 2023.

In his report, the former Indian bureaucrat of the NK Singh and former US Treasury Minister Lawrence Sammers recommended violating the IMF voting and financial contributions to ensure a fair representation for both the Global North and the Global South. But so far there was no progress in the implementation of these recommendations.

In addition, the recent changes in the IMF rules regarding the financing countries in the conflict add more difficulty. A loan of $ 15.6 billion in the Ukrainian Fund in 2023 was The first of its kind From the IMF to the country in the war.

“This tilted its own rules to give Ukraine a huge lending package – it means that it cannot use this occasion to close Pakistan and without the fact that Delhi said about the bachelor’s” Michair Sharma “from the Observer Fund (Orf).

If India really wants to resolve its complaints, the proper forum presents them, the United Nations Fatf (Operational Financial Action Group), says Mr. Hakani.

FATF is considering combating terror financing and deciding whether it is necessary to place countries in gray or black lists that prevent them from accessing funds such as the IMF or the World Bank.

“Outstanding in the IMF cannot and did not work,” Mr. Hakani said. “If the country is on the list (FATF), it will face the IMF loan problems – as it happened with Pakistan before.”

As everything stands, Pakistan was officially removed from a gray financial operation group list (FATF) in 2022.

Separately, experts also warn that India calls for major repairs of IMF financing processes and veto powers can become a bilateral ball.

Such reforms “will inevitably give Beijing (not Delhi) more power,” Mr. Sharma said.

Mr. Hakani agrees. According to him, India should use “bilateral disputes in multilateral forums”, adding that India was historically vetoed in China in such places.

It points to cases that loans that block the ADA (Asian Development Bank) looking for India for the northeast Arunachal-Pradesh, citing border disputes between the two countries of the region.

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