As Pakistan endeavors to secure a fresh IMF loan program to address its financing needs estimated between 6 to 8 billion US dollars, India has made a controversial move to impede the facility for Islamabad.
India’s nominee, executive director Krishnamurthy Subramanian, has called for stringent monitoring of any emergency funds provided to Pakistan by the IMF during a recent review of Pakistan’s ongoing $3 billion short-term Stand-By Arrangement (SBA), according to Indian newspaper The Hindu.
“India has typically refrained from voting on loans sought by Pakistan and maintained this stance last July when the SBA was approved,” stated The Hindu, noting that Subramanian “abstained from voting again in mid-January, resulting in the IMF releasing a $700 million tranche to Pakistan.”
“However, this time, the Indian government urged Mr. Subramanian to convey to the IMF board the necessity to implement ‘checks and balances and ensure stringent monitoring’ of Pakistan’s utilization of IMF money,” The Hindu reported.
“Such monitoring is crucial to ensure that funds allocated to meet development needs are not redirected towards defense expenditures and repayment of external debt owed to third countries,” quoted the Indian executive director.
Can India Block Pakistan’s Loan?
The IMF’s 24-member Executive Board holds the final authority on loans after the IMF’s staff mission reaches an agreement with the country seeking financial assistance.
While Executive Board members possess voting rights, the weightage varies based on the special drawing rights (SDR) each IMF member country holds.
India’s Subramanian heads a group representing countries including Bangladesh, Bhutan, and Sri Lanka, possessing 3.05% votes collectively.
Pakistan and six other nations, represented by Mohammed El Qorchi, jointly hold 2.45% votes.
Given the numerical limitations, India cannot unilaterally block Pakistan’s loan unless it garners support within the IMF board.
Pakistan’s Financing Needs
Pakistan’s financing requirements are estimated between $6 billion and $8 billion, with impending debt servicing obligations of $6 billion before the fiscal year ends in June. This includes significant payments due in April upon the maturity of Pakistan’s dollar bonds.
Moody’s recent assessment suggests Pakistan can meet its external payment obligations until June 2024 but faces challenges in securing substantial external financing beyond that point.
