In a significant development, the International Monetary Fund (IMF) has approved a $1 billion disbursement to Pakistan under its ongoing $7 billion Extended Fund Facility (EFF) program. This decision comes amidst economic challenges and geopolitical tensions in the region.
Background of the IMF-Pakistan Agreement
The EFF program, initiated in July 2024, aims to support Pakistan's economic stabilization efforts. The recent approval marks the completion of the first review, bringing total disbursements to approximately $2 billion. Additionally, the IMF has approved a $1.4 billion arrangement under the Resilience and Sustainability Facility (RSF) to assist Pakistan in building climate resilience.Reuters The Times of India
India's Concerns and Regional Implications
India has expressed strong objections to the IMF's decision, citing concerns over the potential misuse of funds for state-sponsored cross-border terrorism. During the IMF board meeting, India abstained from voting and registered its dissent, highlighting Pakistan's track record and the risk of fund diversion. Reuters
Pakistan's Economic Reforms and IMF's Assessment
The IMF acknowledged Pakistan's efforts in implementing economic reforms, noting progress in stabilizing the economy and rebuilding confidence. Key achievements include a primary surplus of 2% of GDP in the first half of FY25 and a significant reduction in inflation to 0.3% in April. The State Bank of Pakistan has also cut the policy rate by 1100 basis points since June 2025. The Timesof India IMF
Conclusion
The IMF's approval of the $1 billion disbursement underscores international support for Pakistan's economic reform agenda. However, the concerns raised by neighboring India highlight the complex interplay between economic assistance and geopolitical dynamics in South Asia.
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