The World Bank is poised to provide Pakistan with a substantial $20 billion economic package. India has bly opposed this decision, expressing concerns that Pakistan may misuse these funds. India will also engage with the FATF.
Pakistan: While the International Monetary Fund (IMF) has already extended assistance to alleviate Pakistan's economic crisis, the World Bank is now preparing to offer a significant financial package. The Indian government has vehemently opposed this proposal, voicing concerns about the potential misuse of funds by Pakistan. Let's delve into the details of this matter, the Indian government's objections, and the potential outline of this economic aid to Pakistan.
Pakistan May Receive a $20 Billion Relief Package
The World Bank may approve $20 billion in economic assistance for Pakistan in June 2025. This amount is almost three times the aid provided by the IMF. Previously, the IMF offered a $7 billion relief package to Pakistan, of which $2.1 billion has already been disbursed. On May 9, 2024, the IMF also approved a new $1 billion loan for Pakistan aimed at improving its financial situation.
The Indian government will engage with the World Bank regarding this large package and will also urge the Financial Action Task Force (FATF) to place Pakistan on the grey list. India believes that Pakistan will not utilize these funds appropriately, instead diverting them towards terrorism and bolstering its defense infrastructure.
Strong Opposition from the Indian Government
The Indian government contends that Pakistan has consistently misused foreign aid to promote terrorism and support terrorist groups. India is concerned that this substantial World Bank package could be similarly misused, jeopardizing regional peace and security.
India has also pointed out that previous IMF data indicates a significant portion of the economic assistance received by Pakistan has been allocated towards weapons and military expenditure, rather than towards public development or economic stabilization. Consequently, India raised this issue with IMF Managing Director Kristalina Georgieva.
IMF Assistance to Pakistan and Associated Conditions
The IMF has provided Pakistan with assistance under a $7 billion package, of which $2.1 billion has been disbursed so far. On May 9th, Pakistan received a further $1 billion loan, part of the Extended Fund Facility (EFF). The IMF stated that Pakistan met all the stipulated criteria for economic reforms, justifying this assistance.
The IMF maintains that these funds are directly channeled to Pakistan's central bank, not for government expenditure. However, the government can draw funds from the central bank as needed. The IMF imposed 50 conditions on Pakistan, 11 of which were recently added, to ensure the proper utilization of the package. The IMF also cited Indo-Pakistani tensions as a risk factor for the program.
Pakistan's Situation: Economic Crisis and Mounting Challenges
Pakistan is currently grappling with a severe economic crisis. Foreign investment is dwindling, inflation is soaring, and debt repayment continues to pose significant challenges. Therefore, financial aid from major institutions like the IMF and World Bank is crucial for Pakistan.
However, India and several other countries are apprehensive that Pakistan might utilize this economic assistance to fuel terrorism or strengthen its military capabilities, rather than for economic reforms.
The World Bank's Role and India's Actions
The World Bank may approve a $20 billion package for Pakistan in June 2025. The Indian government plans to engage with the World Bank on this proposal to ensure that this aid is not used to support terrorism.
Simultaneously, India will request the FATF to place Pakistan on the grey list to enhance international scrutiny of Pakistan's financial transactions. India's strategy is to ensure that Pakistan receives economic aid only after taking stringent measures against terrorism.
