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The immediate distribution of about USD 1 billion to Pakistan under the current Extended Fund Facility was authorized by the International Monetary Fund (IMF) on Friday. The international lender with headquarters in Washington said in a statement that its Executive Board has completed the first evaluation of Pakistan’s economic reform initiative under the Extended Fund Facility (EFF) agreement.

“This decision allows for an immediate disbursement of around USD 1 billion (SDR 760 million), bringing total disbursements under the arrangement to about USD 2.1 billion (SDR 1.52 billion),” stated the agency. Furthermore, the authorities’ request for an arrangement under the Resilience and Sustainability Facility (RSF) with access to about USD 1.4 billion (SDR 1 billion) was granted by the IMF Executive Board.

In a statement, the IMF said that Pakistan’s 37-month EFF, which was authorized on September 25, 2024, “aims to build resilience and enable sustainable growth,” with entrenching macroeconomic sustainability as one of its goals. According to the statement, the RSF would help Pakistan strengthen its economic and climatic resilience while lowering its susceptibility to natural calamities.

Deputy Managing Director and Chair Nigel Clarke said that risks to the forecast are still high, “especially from global economic policy uncertainty, rising geopolitical tensions, and persistent domestic vulnerabilities,” after the Executive Board debate. Given Pakistan’s dismal record, India has previously expressed doubts about the effectiveness of IMF programs in that country as well as the potential for debt financing monies to be misused for state-sponsored cross-border terrorism.

The IMF’s plan to provide Pakistan new loans totaling USD 2.3 billion was also rejected by New Delhi, which said the funds may be abused to fund state-sponsored cross-border terrorism. When the IMF board convened on Friday to examine the EFF loan package for Pakistan, India lodged its concern. At the important IMF conference, New Delhi did not cast a vote.

India’s remarks and decision to abstain from the vote were noted by the IMF. India’s resistance at the IMF coincides with a heightened military confrontation between India and Pakistan after the April 22 terrorist incident in Pahalgam, Kashmir, which claimed the lives of 26 people, mostly tourists. In a statement, the Indian finance ministry said that encouraging ongoing support for cross-border terrorism sends a harmful message to the international community, puts donors and funding organisations at risk for damage to their reputations, and denigrates international ideals.

The IMF’s reaction is limited by procedural and technical formalities, despite the fact that some member nations expressed concern that fungible inflows from international financial organisations, such as the IMF, may be abused for military and state-sponsored cross-border terrorist activities. “This is a serious gap highlighting the urgent need to ensure that moral values are given appropriate consideration in the procedures followed by global financial institutions,” the ministry said.

It said that there is a serious danger of policy lapses and reform reversals due to the Pakistani military’s long-standing meddling in economic matters. The army still has a significant influence on domestic politics and spreads its influence across the economy, even under the current civilian administration. According to the statement, military-affiliated companies were the “largest conglomerate in Pakistan” according to a 2021 UN study.

It pointed out that the situation has not improved and that the Pakistani army is now a key player in the country’s Special Investment Facilitation Council. “Prime Minister Shehbaz Sharif expressed satisfaction over the approval of a USD 1 billion dollar instalment for Pakistan by the IMF and the failure of India’s high-handed tactics against it,” according to a statement released by the Prime Minister’s Office in Pakistan.

The economic status of Pakistan has improved, and the nation is progressing. It said that India was planning a strategy to use unilateral action to deflect attention from the progress of our nation. According to the statement, “Indian attempts to sabotage the IMF program have failed,” and the IMF program will assist in stabilising Pakistan’s economy and setting it up for long-term recovery.

“Private sector growth, better energy sector performance, and tax reform are among our top priorities. The government’s successful measures are reflected in the improving economic indicators over the last 14 months,” it said. With the IMF’s executive board’s approval, USD 1 billion has been disbursed immediately, increasing the total amount disbursed under the loan program to almost USD 2 billion.

Pakistan is eligible to receive seven equal installments of around USD 1 billion under the loan program upon the successful completion of seven half-yearly evaluations. In July of last year, Pakistan and the IMF signed a three-year, USD 7 billion assistance package agreement. The new program will help the nation establish macroeconomic stability and foster more robust, inclusive, and resilient development.

On March 25 of this year, the IMF and Pakistan reached a staff-level agreement on the first biannual review of the 39-month USD 7 billion loan program. The agreement included a number of reforms, such as the liberalisation of the automobile sector, timely revisions to electricity tariffs, increased water pricing, and the introduction of a carbon levy.