Economic ‘surgical attack’ on Pakistan! Islamic nation to starve of funds as India may take THIS step at IMF

International Monetary Fund or IMF

Will India block Pakistan’s bid to get a $7 billion loan from the International Monetary Fund (IMF)? Will New Delhi vote against Pakistan’s loan proposal in the next meeting of the Executive Board, scheduled for May 9? Traditionally, India has been abstaining from such votes and not putting hurdles in its way so that the loan proposal gets approved. However, New Delhi is most likely to change its stand in the wake of the Pahalgam terrorist attack, in which 26 people were killed. The Resistance Front, considered a facade for the Pakistan-based Lashkar-e-Taiba, claimed the responsibility, though it denied its role later. 

All eyes on IMF Executive Board meeting

The Executive Board of the IMF will meet Friday in Washington, D.C., in this context, when India-Pakistan relations have reached their lowest point. Tension between the two neighbours has escalated to a new height as they look into each other’s eyes with full military preparation. A small spark may ignite a full-fledged war at any moment. Pakistan’s application for a $7 billion loan was accepted for consideration last year. 

 

How can India block loan to Pakistan?

After putting too many conditions on pressure for economic reforms, the IMF agreed to discuss it threadbare. India has a share of 2.36%, which is insufficient to block or approve any proposal. However, New Delhi can seek the help of others with bigger shares. While the US has 16.5%, Japan has a 6.1% voting share. On the other hand, China, the “all weather friend” of Pakistan, has a voting share of 6.09%. It is difficult to predict if Washington and Tokyo will vote against the proposal, as they too have geopolitical and business interests. 

India’s next move: FATF?

This vote is also important because it may indicate India’s strategy of pushing Pakistan back to the grey list of the Financial Action Task Force (FATF). Set up in 1989, the 40-member group decided on combating money laundering and terror financing. Pakistan was on its grey list from 2022 to 2024. It was on the verge of being put on the blacklist when it took steps like taking LeT kingpin Hafiz Saeed in custody. Once put on the blacklist of the FATF, any country would not get any loan, advance, or any kind of financial assistance from any multilateral agency like the IMF, World Bank, or the International Finance Corporation. 

 

Analysts believe that though New Delhi may not be able to block the loan to Pakistan, it will certainly put the Islamic nation in an embarrassing position with allegations of supporting and financing terrorism. Secondly, other nations may get an indication to not invest in Pakistan or assist it economically or financially. Pakistan is left with enough foreign reserve to meet the requirement of only a few weeks. 

Pakistan’s economy in shambles

Its currency has plummeted to the level of 281 US dollars, inflation is hovering around 10-12%, and people fight over basic commodities like flour and rice unemployment rate is at 5.7%. Pakistan’s international trade is abysmal, with exports reaching $35.8B in 2023, making it the number 66 exporter in the world. On the other hand, India had an international trade of 778.21 billion, with exports worth $341.11 billion in 2023-24.

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