Key Points
- The disbursed funds are strictly for foreign reserve support.
- India’s attempts to block Pakistan’s funding at global forums failed.
- Pakistan’s economic indicators show improvement, with a budget surplus, lower inflation, and rising foreign reserves.
- India continues a broader campaign to diplomatically and financially isolate Pakistan.
ISLAMABAD: The International Monetary Fund (IMF) on Friday said that its executive board had approved additional funding for Pakistan after confirming that the country had met all targets under the Extended Fund Facility (EFF), categorically stating that the funds are strictly intended to support Islamabad’s foreign currency reserves and “not for government budget financing.”
“The board agreed to the funding because Pakistan had made progress on required reforms and met all the necessary conditions,” IMF spokesperson Julie Kozack said at a press briefing in Washington DC.
The statement was in response to a question by an Indian journalist, who suggested that Pakistan might use the funds to support areas linked to cross-border terrorism.
Some Indian journalists raised concerns about rising tensions between India and Pakistan and asked how the IMF ensures its money is not used for military purposes. One also brought up a controversy involving the departure of India’s representative at the IMF.
Kozack explained that Pakistan’s EFF program was approved in September 2024, with the first review planned for early 2025. This review happened in March, and the board completed it on May 9, leading to the release of funds to Pakistan.
She said the IMF follows a regular process to review how countries are doing under these programmes.
The board checks if countries are meeting their goals and whether changes are needed to keep the programme on track, she said.
The IMF spokesperson also clarified that the funds provided to Pakistan under the Extended Fund Facility (EFF) are kept with the central bank and are not used to fund the government’s budget. She emphasised that the money is strictly for stabilising the country’s foreign reserves and not for direct government spending.
Kozack added that the programme includes several safeguards.
For instance, there is a strict rule that the central bank cannot lend money to the government. The programme also requires Pakistan to follow policies that improve financial management. If Pakistan does not stick to these conditions, future funding reviews could be negatively affected, she said.
Regarding the resignation of India’s representative at the IMF, Kozack said that each country has the right to choose who represents it at the IMF.
When asked about tensions between Pakistan and India, Kozack expressed sympathy for those affected by the conflict and said the IMF hopes for a peaceful resolution.
Earlier this month, the IMF approved two major funding deals for Pakistan: $1 billion under the EFF and $1.4 billion under the Resilience and Sustainability Facility (RSF), which supports climate-related projects.
The IMF noted that Pakistan has made good progress on economic reforms despite global challenges. The first review of the EFF was completed successfully, allowing an immediate release of about $1 billion, bringing the total received under this programme to $2.1 billion.
According to the IMF, Pakistan’s financial performance has been strong. The country achieved a budget surplus of 2 per cent of GDP in the first half of the fiscal year, with the goal of 2.1 per cent for the full year still within reach. Inflation has dropped significantly, reaching just 0.3 per cent in April. As a result, the State Bank of Pakistan was able to lower interest rates by 11 percentage points. Foreign reserves also improved, rising to $10.3 billion in April, and are expected to increase further to $13.9 billion by the end of June 2025.
The RSF funding aims to help Pakistan better manage climate risks and natural disasters while building long-term economic resilience.
President Asif Ali Zardari praised the IMF’s support, noting its role in promoting economic development. He thanked the IMF and acknowledged the finance ministry’s efforts. Prime Minister Shehbaz Sharif also reaffirmed the government’s focus on reforms and sustainable growth, stating that Pakistan is now moving from stability towards long-term development.
Indian efforts to isolate Pakistan remain a dream
In recent years, India has intensified a baseless propaganda campaign aimed at diplomatically and economically isolating Pakistan, particularly in the realm of international financial assistance. Through a calculated use of global institutions, diplomatic channels, and multilateral platforms, India has sought to undermine Pakistan’s standing and access to vital economic support.
One of the key elements of this campaign is India’s consistent opposition to Pakistan’s engagement with the International Monetary Fund (IMF). When the IMF approved a $1 billion disbursement under Pakistan’s Extended Fund Facility (EFF), India abstained from voting and raised unfounded concerns about Pakistan’s past use of IMF support. These objections appear less about financial oversight and more about obstructing Pakistan’s economic recovery, as India claimed—without evidence—that the aid might not lead to meaningful reforms.
India has also been pushing for Pakistan’s re-inclusion into the Financial Action Task Force (FATF) grey list, using allegations related to anti-money laundering and counter-terror financing compliance. This move seems more about political point-scoring than actual financial governance, as Pakistan has made significant progress acknowledged by global institutions. India’s push is clearly intended to scare off investors and international lenders by painting a distorted picture of risk.
Reports suggest that India plans to challenge upcoming World Bank loans to Pakistan, further exposing its intent to block Pakistan’s access to development funds needed for economic progress. This aligns with India’s broader agenda to use financial pressure as a tool of coercion.
