After multilateral agency granted fresh loans to Pakistan, Experts say IMF in need of funding process reforms

New Delhi: The International Monetary Fund (IMF) needs to reform its funding processes and review conditions for making finances available to countries, experts said on Saturday, a day after the multilateral body approved fresh loans to Pakistan amid its armed conflict with India.

The IMF should now analyse why frequent bailouts haven't worked for Pakistan and whether Islamabad deserves the fund's generous indulgence every now and then, they told ET. Also, Indian officials should step up engagement with the IMF staff and ensure that the funds being made available to Pakistan aren't diverted towards war or terrorism - a concern already expressed by New Delhi.

Pronab Sen, former chairman at the National Statistical Commission, said the IMF funds to a country are typically tied to conditions. Once a country meets them, fresh tranches of a bailout programme are released. He expected India to continue to voice its opposition to the IMF funding to Pakistan.


Given the dominant role of the US at the IMF, the "continuation of bailouts to Pakistan will hinge on how the American administration perceives Islamabad in the coming years - an ally of the US or China", Sen added.

Review of Conditions

NR Bhanumurthy, director of the Madras School of Economics, said: "It's time for the IMF to initiate reforms in fund disbursement processes. It has to review the whole gamut of conditionalities and the efficacy of bailout programmes for countries." This can be made a part of the reforms of the IMF and other multilateral institutions, mooted during India's G20 presidency in 2023, he added.

India has pointed out to the IMF that Pakistan has had disbursements from the IMF in 28 of the 35 years since 1989. In the last five years, there have been four IMF programmes to support it.

The IMF board, which met in Washington DC on Friday, approved an extended fund facility lending programme of $1 billion to Pakistan. It also cleared a $1.4 billion credit line for climate resilience efforts.

India abstained from voting at the board meeting, raising concerns over the efficacy of such bailouts and flagging the "possibility of misuse of funds for state-sponsored cross-border terrorism".

There is no provision to vote against a proposal at the IMF. A country can vote in favour or abstain.

If the previous programmes had succeeded in putting in place a sound macroeconomic policy environment, India stressed, Pakistan would not have approached the fund for yet another bailout programme. New Delhi has also underscored the "oversized" role of the Pakistani army in the economic affairs there.