‘Met all targets, sufficient Board consensus’: What IMF said on releasing bailout package to Pakistan

In a press briefing, the IMF’s Director of Communications, Julie Kozack, said the Board approved the program based the country’s progress on “some of the reforms”. (IMF)

The approval came amid rising tensions between India and Pakistan even after New Delhi had abstained from voting in the IMF’s Executive Board meeting on May 9, which allowed the latest tranche of funds to be disbursed as part of its Extended Fund Facility (EFF). New Delhi had highlighted Pakistan’s poor track record using IMF’s funds and pointed to the possibility of “misuse of debt financing funds for state-sponsored cross-border terrorism”.

Chronology and timeframe

According to the IMF, the Extended Fund Facility (EFF) “provides financial assistance to countries facing serious medium-term balance of payments problems because of structural weaknesses that require time to address”. The 37-month EFF was approved on September 25 last year to a total disbursement of $7 billion to Pakistan.

With the EFF program approved, the IMF planned the first review for the first quarter of 2025. With that timeline in view, the IMF staff and Pakistani authorities reached a Staff-Level Agreement on March 25.

“That agreement, that Staff-Level Agreement, was then presented to our Executive Board, and our Executive Board completed the review on May 9. As a result of the completion of that review, Pakistan received the disbursement at that time,” Kozack said in the press briefing.

On the majority vote

Responding to a question, Kozack said the majority vote that was received to approve the bailout package cannot be disclosed publicly. “With respect to the voting or the decision-making at our Board, we do not disclose that publicly. In general, Fund Board decisions are taken by consensus, and in this case, there was a sufficient consensus at the Board to allow us to move forward or for the Board to decide to move forward and complete Pakistan’s review.”

3 points on the question of safeguards

When asked about the IMF’s general safeguards so that its funds won’t be used for military or in support of military actions, Kozack highlighted the following pointers.

1. IMF financing is provided to members for the purpose of resolving balance of payments problems.
2. In the case of Pakistan, the EFF disbursements are allocated to the reserves of the central bank. “So, those disbursements are at the central bank, and under the programme, those resources are not part of budget financing. They are not transferred to the government to support the budget,” Kozack said.
3. The programme provides additional safeguards through our conditionality. On the conditionality, Kozack gave examples of targets on the accumulation of international reserves, a zero target which means no lending from the central bank to the government, and the substantial structure around improving fiscal management.

“And, of course, any deviation from the established programme conditions would impact future reviews under the Pakistan program,” she said.

The Indian Express had earlier reported that two days before the May 9 meeting, the IMF staff had prepared a Supplementary Information docket, flagging flagged “reputational risks” over perceived misuse of its lending and the increase in “enterprise risks” due to rising tensions with India. It further noted that as mitigants, the Pakistani authorities reiterated their strong commitment to the program.

The report also included 11 new structural benchmarks introduced by the Fund. They have been linked to fiscal, governance, social, monetary and financial parameters along with metrics to be met in energy sector and trade, investment policy and deregulation among others.

IMF on India-Pakistan conflict

The global body’s communications director said it hopes for a “peaceful resolution” of the ongoing India-Pakistan conflict. “With respect to Pakistan and the conflict with India, I want to start here by first expressing our regrets and sympathies for the loss of life and for the human toll from the recent conflict. We do hope for a peaceful resolution of the conflict,” Kozack added.

With Operation Sindoor on the intervening night on May 7-8, Indian armed forces targeted and destroyed nine terror sites in Pakistan and Pakistan-occupied Kashmir including the headquarters of the Lashkar-e-Taiba and Jaish-e-Mohammed. The airstrikes targetting terror infrastructure in Pakistan were conducted in response to the April 22 terror attack in Jammu and Kashmir’s Pahalgam which claimed the lives of 22 people.

The two countries agreed to an immediate ceasefire to stop military action on May 10.