The International Monetary Fund (IMF) has defended its recent $1 billion bailout package to Pakistan, issued as part of a broader $7 billion Extended Fund Facility (EFF) agreement, despite strong objections from India regarding Pakistan’s alleged support for terrorism and ongoing cross-border tensions.

India had formally urged the IMF to reconsider the bailout, arguing that financial assistance to Pakistan indirectly enables state-sponsored terrorism, particularly in the wake of India’s Operation Sindoor—a military strike on terror infrastructure in Pakistan and Pakistan-Occupied Kashmir (PoK).

IMF spokesperson Julie Kozack clarified that the decision to release the funds was based on Pakistan’s compliance with all required targets and reforms stipulated under the EFF program. She emphasised that the IMF’s executive board had conducted a thorough review, confirming Pakistan’s progress and fulfilment of conditions before approving the disbursement. Kozack also expressed the IMF’s hope for a peaceful resolution to the India-Pakistan conflict, acknowledging the human toll of recent hostilities.

In response to ongoing fiscal and external vulnerabilities, and amid heightened regional tensions, the IMF imposed 11 new conditions on Pakistan for the release of subsequent bailout tranches. These conditions are designed to enforce fiscal discipline, enhance transparency, and ensure structural reforms. 

Key requirements include:

Parliamentary approval of a new Rs 17.6 trillion federal budget for fiscal year 2025–26.
Implementation of higher debt servicing surcharges on electricity bills.
Removal of restrictions on the import of used cars older than three years.
Provincial implementation of new agriculture income tax laws.
Publication of a post-2027 financial sector strategy.
Adoption of legislation to make the captive power levy ordinance permanent.
Preparation of a plan to phase out all fiscal incentives for Special Technology Zones and other industrial parks by 2035.
Issuance of annual electricity tariff rebasing and semi-annual gas tariff adjustments to ensure cost recovery.
Commitment to allocate Rs 1.07 trillion for development spending within the approved budget.

The IMF has also warned that escalating tensions between India and Pakistan could jeopardize the fiscal, external, and reform objectives of the bailout program, highlighting the interconnectedness of regional stability and economic recovery. The IMF reiterated that all disbursements go directly to Pakistan’s central bank reserves and are strictly monitored, with no direct financing of government budgets, to address concerns about potential misuse of funds.

In summary, the IMF’s defence of its bailout package to Pakistan is grounded in procedural compliance and economic reform benchmarks, while acknowledging geopolitical risks and India’s security concerns. The newly imposed conditions reflect a stringent approach aimed at ensuring Pakistan’s fiscal discipline and long-term economic stability under continued international scrutiny.

Based On NDTV Report