TEMPO.CO, Jakarta - The International Monetary Fund's (IMF) executive board on Friday approved the disbursement of around US$1 billion or about Rp16.5 trillion to Pakistan, despite protests from India, the neighboring country currently in conflict. According to The News India Express, this loan provides some relief for Pakistan's finances amid worsening conflicts with neighboring India.
Although the board's vote on the payment is usually a formality - essentially ratifying the agreement reached in March between the IMF staff and the government of Pakistan - the recent escalation of hostilities between the nuclear-armed neighboring countries has become the focus of the decision.
The Washington-based lender said in a statement that the IMF board approved the disbursement of around $1 billion from the broader $7 billion program agreed upon last year. The IMF board also approved a separate $1.4 billion loan to support climate resilience, but has not yet disbursed those funds.
This week, Indian officials said their representatives at the IMF board would oppose the loan, a public comment rarely seen in the usually private discussions at the apex fund.
However, the push is expected to have little chance of success given India's limited voting share in the board, as well as Pakistan's track record in meeting loan conditions.
India has expressed concerns to the multilateral lenders about the loans given to Pakistan. New Delhi warned that the funds could be used to support cross-border terrorism sponsored by the country
"Praising continued support for cross-border terrorism is a dangerous message," the Indian Finance Ministry said in a statement as reported by The Times of India.
The Indian government affirmed on Friday that they abstain from the vote.
Pakistan's Prime Minister Shehbaz Sharif welcomed the disbursement of the loan, describing it as a "defeat of India's arbitrary tactics."
"India's attempt to sabotage the IMF program has failed," the Pakistan Prime Minister's office said, accusing India of planning a "conspiracy to divert attention" through "unilateral aggression."
The funds will bolster Pakistan's foreign exchange reserves and support the economy, which faces obstacles from substantial tariffs implemented by US President Donald Trump and deteriorating relations with India.
The hostilities between the two countries have escalated since an attack in Kashmir last month that killed 26 civilians in the Indian-administered region.
"We remain focused on efforts to maintain macroeconomic discipline while facing geopolitical pressures responsibly and steadfastly," said Khurram Schehzad, advisor to Pakistan's Finance Minister Muhammad Aurangzeb, in a brief message.
IMF loans have brought their own political pressures on Prime Minister Shehbaz Sharif's government, which has raised taxes, hiked energy prices, and cut subsidies to secure approval for the funds.
The government is expected to present its annual budget in parliament later this month.
Pakistan avoided defaulting in 2023, but still faces a heavy burden of interest payments. Last year, the IMF estimated that the country would need over $100 billion in external financing until 2029. Pakistan's foreign exchange reserves of over $10 billion are sufficient for less than three months of imports.
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