IMF rejects India’s claims of misused funds, says Pakistan loan strictly for reserves

WEB DESK: During a press briefing in Washington, IMF Director of Communications Julie Kozack clarified the terms of Pakistan’s loan program, stating that the funds are strictly designated to support the country’s foreign exchange reserves and cannot be used for budgetary financing or other purposes. The statement came in response to a question from an Indian journalist, who insinuated that Pakistan could potentially divert IMF funds for activities across the border, including terrorism. Kozack firmly dismissed the suggestion, reiterating that the IMF’s financial assistance is solely for balance of payments support and is deposited directly into the State Bank of Pakistan’s (SBP) reserves.

Pakistan secured a three-billion stand arrangement (SBA) from the IMF in September 2023.

The approval of a 1.1 billion loan tranche on May 9 came after the country met all required economic reform targets, including fiscal adjustments. IMF spokesperson Julie Kozack confirmed Pakistan’s compliance, stating that the government has fulfilled all structural benchmarks under the program.

IMF sets stringent pre-budget conditions for Pakistan

She referred to a key condition of the agreement: Pakistan cannot borrow from the central bank for budgetary support. “At this stage, the government has zero borrowing from the State Bank,” Kozack said. The IMF Executive Board unanimously approved the fund release based on Pakistan’s performance, though the voting process remains confidential, in line with IMF policy.

When questioned about whether an Indian Executive Director’s resignation from the IMF Board would affect proceedings, Kozack stated that such changes do not impact the institution’s operations. She also expressed regret over the loss of lives in conflicts between India and Pakistan, urging both countries to seek peaceful resolutions to their disputes. “We hope Pakistan and India can resolve recent tensions amicably,” she added. The IMF’s clear guidelines on fund usage are designed to ensure transparency and prevent misuse, reinforcing the program’s integrity amid geopolitical scrutiny. Pakistan’s continued adherence to IMF conditions has helped stabilise its economy, though challenges such as high inflation and external debt persist.