IMF Loan Review and India's Concerns
The International Monetary Fund (IMF) is conducting the first review of a $7 billion bailout package extended to Pakistan. During this process, India is set to express concerns regarding Pakistan's plan to invest nearly $600 million in the New Development Bank (NDB) established by BRICS nations.
- India's Stance: India generally abstains from voting on loans sought by Pakistan in IMF board meetings. However, in January 2024, India urged the IMF to ensure "stringent monitoring" of funds provided to Pakistan to prevent diversion towards defense spending or repayment of external debts.
- Pakistan's Investment Plan: The Economic Coordination Committee of Pakistan's Cabinet has decided to purchase shares worth $582 million in the NDB, which aligns the country with the BRICS nations and aims to reduce dependence on Western lenders like the IMF.
- India's Concerns: India plans to highlight the contradiction in Pakistan seeking IMF assistance for economic crises while planning substantial investments in another multilateral institution.
IMF's Evaluation and India's Prior Requests
The IMF team's review will focus on Pakistan's progress on mandated reform measures, including expanding the tax base, promoting privatization, rebuilding policy credibility, and ensuring macroeconomic sustainability. The disbursement of the next tranche of $1.1 billion depends on these evaluations.
- India's Previous Requests: India had earlier requested the IMF to monitor the usage of loaned funds by Pakistan, ensuring they are not redirected to repay debts to other countries or for defense purchases.
- Official Reactions: Concern has been raised about Pakistan's plans to invest in the NDB while receiving multiple IMF bailouts and not adhering to recommended reforms.
NDB Membership and Current Status
- NDB Membership: The NDB was established by Brazil, Russia, India, China, and South Africa in 2015. In 2021, the NDB Board approved the entry of Bangladesh, UAE, Egypt, and Uruguay as new members.
- Shareholding: Each founding member, including India, holds an 18.98% stake based on an initial share subscription worth $10 billion each.
- Pakistan's Membership Status: Though Pakistan expressed interest in joining the NDB, discussions among shareholders have not yet taken place, and any payment for membership is not imminent.
Conclusion
India is poised to discuss Pakistan's financial strategies with the IMF, emphasizing the need for careful monitoring to prevent misuse of funds. The debate highlights the wider geopolitical and economic implications of development bank memberships and international loans.