Last week the International Monetary Fund (IMF) approved a $1bn (£756m) bailout to Pakistan – a move that drew sharp disapproval from India as military hostilities between the nuclear-armed neighbours flared, before aUS-led ceasefirewas unexpectedly declared. Despite India's protests, the IMF board approved the second instalment of a $7bn loan, saying Islamabad had demonstrated strong programme implementation leading to a continuing economic recovery in Pakistan. It also said the fund would continue to support Pakistan's efforts in building economic resilience to "climate vulnerabilities and natural disasters", providing further access of around $1.4bn in funding in the future. In a strongly wordedstatementIndia raised concerns over the decision, citing two reasons. Delhi questioned the "efficacy" of such bailouts or the lack thereof, given Pakistan's "poor track record" in implementing reform measures. But more importantly it flagged the possibility of these funds being used for "state-sponsored cross-border terrorism" – a charge Islamabad has repeatedly denied - and said the IMF was exposing itself and its donors to "reputational risks" and making a "mockery of global values". The IMF did not respond to the BBC's request for a comment on the Indian stance. Even Pakistani experts argue that there's some merit to Delhi's first argument. Pakistan has been prone to persistently seeking the IMF's help – getting bailed out 24 times since 1958 – without undertaking meaningful reforms to improve public governance. "Going to the IMF is like going to the ICU [intensive care unit]. If a patient goes 24 or 25 times to the ICU then there are structural challenges and concerns that need to be dealt with," Hussain Haqqani, former Pakistani ambassador to the US, told the BBC. But addressing Delhi's other concerns – that the IMF was "rewarding continued sponsorship of cross-border terrorism" thereby sending a "dangerous message to the global community" – is far more complex, and perhaps explains why India wasn't able to exert pressure to stall the bailout. India's decision to try to prevent the next tranche of the bailout to Islamabad was more about optics then, rather than a desire for any tangible outcome, say experts. As per the country's own observations, the fund had limited ability to do something about the loan, and was "circumscribed by procedural and technical formalities". As one of the 25 members of the IMF board, India's influence at the fund is limited. It represents a four-country group including Sri Lanka, Bangladesh and Bhutan. Pakistan is part of the Central Asia group, represented by Iran. Unlike the United Nations' one-country-one-vote system, the voting rights of IMF board members are based on a country's economic size and its contributions – a system which has increasingly faced criticism for favouring richer Western countries over developing economies. For example, the US has the biggest voting share - at 16.49% - while India holds just 2.6%. Besides, IMF rules do not allow for a vote against a proposal - board members can either vote in favour or abstain – and the decisions are made by consensus on the board. "This shows how vested interests of powerful countries can influence decisions," an economist who didn't want to speak on the record told the BBC. Addressing this imbalance was a key proposal in the reforms mooted for the IMF and other multilateral lenders during India's G20 presidency in 2023. In their report, former Indian bureaucrat NK Singh and former US treasury secretary Lawrence Summers recommended breaking the link between IMF voting rights and financial contributions to ensure fairer representation for both the "Global North" and the "Global South". But there has been no progress so far on implementing these recommendations. Furthermore, recent changes in the IMF's own rules about funding countries in conflict add more complexity to the issue. A $15.6bn loan by the fund to Ukraine in 2023 was thefirst of its kindby the IMF to a country at war. "It bent its own rules to give an enormous lending package to Ukraine - which means it cannot use that excuse to shut down an already-arranged loan to Pakistan," Mihir Sharma of the Observer Research Foundation (ORF) think tank in Delhi told the BBC. If India really wants to address its grievances, the right forum to present them would be the United Nations FATF (Financial Action Task Force), says Mr Haqqani. The FATF looks at issues of combating terror finance and decides whether countries need to be placed on grey or black lists that prevent them from accessing funds from bodies like the IMF or the World Bank. "Grandstanding at the IMF cannot and did not work," said Mr Haqqani. "If a country is on that [FATF] list it will then face challenges in getting a loan from the IMF – as has happened with Pakistan earlier." As things stand though, Pakistan was officially removed from the Financial Action Task Force (FATF) grey list in 2022. Separately, experts also caution that India's calls to overhaul the IMF's funding processes and veto powers could be a double-edged sword. Such reforms "would inevitably give Beijing [rather than Delhi] more power", said Mr Sharma. Mr Haqqani agrees. India should be wary of using "bilateral disputes at multilateral fora", he said, adding that India has historically been at the receiving end of being vetoed out by China in such places. He points to instances of Beijing blocking ADB (Asian Development Bank) loans sought by India for the north-eastern state of Arunachal Pradesh, citing border disputes between the two countries in the region. Follow BBC News India onInstagram,YouTube,TwitterandFacebook
Why India could not stop IMF bailout to Pakistan
TruthLens AI Suggested Headline:
"IMF Approves $1 Billion Bailout for Pakistan Amidst India's Concerns"
Bbc News
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TruthLens AI Summary
The International Monetary Fund (IMF) recently approved a $1 billion bailout for Pakistan, a decision that has drawn significant criticism from India amidst heightened military tensions between the two nations. The IMF's board justified the approval by stating that Pakistan had shown substantial progress in implementing its economic recovery program, which is part of a larger $7 billion loan package. The IMF also highlighted its commitment to assist Pakistan in building resilience against climate change and natural disasters, planning to provide an additional $1.4 billion in the future. However, India voiced strong objections, questioning the effectiveness of such bailouts given Pakistan's history of failing to implement necessary reforms. India raised alarms about the potential misuse of these funds for state-sponsored terrorism, a claim that Pakistan has consistently denied. This situation has led to concerns regarding the reputational risks faced by the IMF and its donors due to the perceived complicity in Pakistan's alleged cross-border terrorism activities.
Experts suggest that India's attempts to block the bailout were more about optics than about the feasibility of achieving a tangible outcome. India's influence within the IMF is limited, as it holds a small voting share compared to more economically powerful countries like the United States, which has a voting share of 16.49%. IMF decisions are made by consensus, and members can only vote in favor or abstain, complicating India's ability to exert its will. Furthermore, recent changes in IMF policies regarding funding for countries involved in conflict have added layers of complexity to the situation. The Fund's recent loan to Ukraine, which was unprecedented for a country at war, sets a precedent that undermines India's argument against the bailout to Pakistan. Experts argue that India's grievances would be better addressed in forums like the Financial Action Task Force (FATF), which focuses on combating terror financing. They caution, however, that calls for reforming the IMF's structure could inadvertently empower China, a nation that has historically opposed India in multilateral settings. As Pakistan has recently been removed from the FATF's grey list, the immediate implications for its access to international funding remain a critical concern for India and the broader geopolitical landscape in South Asia.
TruthLens AI Analysis
The article examines the recent approval of a $1 billion bailout to Pakistan by the International Monetary Fund (IMF) and highlights India's strong objections to this decision. The economic context, regional tensions, and implications for international relations are key elements in this discussion.
India's Concerns Over the IMF Decision
India's disapproval stems from two primary concerns. Firstly, Delhi questions the effectiveness of IMF bailouts given Pakistan's history of failing to implement necessary reforms. This skepticism is further underscored by a former Pakistani ambassador's remark comparing reliance on the IMF to a recurring visit to the ICU, suggesting deep structural issues within Pakistan's economy that remain unaddressed.
Secondly, and perhaps more critically, India raises alarms about the potential misuse of these funds for state-sponsored terrorism. This accusation, which Islamabad has consistently denied, poses a significant challenge to the IMF's credibility and could tarnish its reputation among global stakeholders. The article suggests that the IMF's decision may send a troubling message regarding international accountability in financial support.
Public Perception and Potential Manipulation
The publication of this news likely aims to shape public perception of the IMF’s actions and Pakistan's economic situation. It may be intended to bolster India's position in the eyes of its citizens, portraying the government as vigilant against perceived threats from Pakistan. By emphasizing terrorism and economic mismanagement, the article could be seen as an attempt to consolidate national unity and justify India's strategic posture.
However, the focus on accusations against Pakistan may obscure deeper issues related to economic governance in both countries and the broader geopolitical dynamics at play. This selective emphasis can create an incomplete narrative, potentially manipulating public sentiment.
Reliability of Information and Underlying Motives
The reliability of the information presented seems credible, as it draws on statements from the IMF and expert opinions. Yet, the framing of the narrative could suggest an underlying agenda aimed at fostering a particular viewpoint regarding regional security and economic resilience. There is a possibility that the article does not fully explore the complexities of the IMF's role and the multifaceted nature of Pakistan's economic challenges.
The article’s alignment with broader narratives in international relations, particularly concerning India-Pakistan dynamics, indicates that it may resonate more with audiences concerned about national security and governance issues. This focus could alienate those who prioritize economic cooperation and regional stability.
Potential Impact on Markets and Global Dynamics
From a financial perspective, the article may influence investor confidence, particularly in sectors related to Pakistan's economy, such as emerging markets or sectors reliant on foreign aid. The mention of IMF funding could lead to cautious optimism or skepticism among investors, depending on how they perceive the sustainability of Pakistan’s economic reforms.
In terms of global power dynamics, the article highlights the delicate balance between financial assistance and accountability in international relations. The ongoing tensions between India and Pakistan, along with external financial influences, underscore the complexities of geopolitics in South Asia.
In summary, while the article provides a factual account of recent events, its framing and emphasis on specific issues could reflect broader geopolitical narratives and influence public and investor perceptions.