The International Monetary Fund (IMF) will conduct a critical review of Pakistan’s financing facilities at a crucial board meeting in Washington, today, May 9. This review is crucial as Pakistan seeks additional funding to support its struggling economy, which is laden with significant debt and cash flow challenges. India will oppose the additional funding to Pakistan in this meeting, and the country has already made it clear.
India has called on the IMF board members to thoroughly examine Pakistan’s situation and consider the facts before approving further funds.
Tensions between India and Pakistan continue to escalate. Following the Pahalgam terror attack, which claimed the lives of 26 people, India retaliated with a precision strike under Operation Sindoor, destroying 9 terror camps within Pakistan and Pakistan occupied Kashmir (PoK). Since then, Pakistan is involved in mischiefs against India, with India giving befitting reply to Pakistan.
Notably, Pakistan is facing severe economic challenges, including a high foreign debt of over $130 billion, dangerously low foreign exchange reserves, a persistent balance of payments crisis, and high inflation. A significant portion of its debt is owed to China, its key ally.
On the other hand, Pakistan’s foreign exchange reserves stand at approximately $15 billion, sufficient to cover only about three months of imports. According to a report by Fitch, the country faces significant funding needs, with over $22 billion in public external debt maturing in FY25, including nearly $13 billion in bilateral deposits.
IMF Bailout
Pakistan secured a $7 billion bailout package from the IMF in September 2024, which has led to early signs of economic recovery. According to the IMF’s South Asia Development Update, the economy is recovering from natural disasters, external pressures, and inflation.
The IMF noted that while inflation has slowed faster than anticipated and strong capital goods imports and high consumer confidence indicate growing private sector activity, recent economic data has been weaker than expected. Moreover, Pakistan’s economic growth is projected to rise to 3.1% in the financial year 2025-26, up from 2.7% in FY 2024-25. It was 2.5% in 2023-24, and it registered a contraction of 0.2% in 2022-23.
The ongoing 37-month long Extended Fund Facility programme of the IMF consists of six reviews over the span of the bailout, and the IMF is set to review Pakistan’s financing facilities on Friday. India will oppose for the release of funds, highlighting its potential diversion for terror financing, following the April 22 Pahalgam terror attack. The review’s outcome will determine the release of the next $1 billion tranche under the $7 billion Extended Fund Facility program.
As of March 31, 2025, Pakistan’s outstanding loans from the IMF stand at $6.2 billion. Since joining the IMF in 1950, Pakistan took loans from it 25 times. Additionally, the World Bank has provided over $48 billion in assistance to Pakistan since it became a member.
The Pahalgam terror attack and escalating tensions with India have potentially jeopardized Pakistan’s prospects of receiving funds from the IMF.
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