ISLAMABAD:
The International Monetary Fund (IMF) has said that the $7 billion lending programme is meant for only supporting Pakistan’s foreign exchange reserves and it cannot be used for to finance the budget, brushing aside Indian propaganda about the usage of the loan.
“All of the Extended Fund Facility (EFF) disbursements are allocated to the reserves of the central bank. So, those disbursements are at the central bank, and under the programme, those resources are not part of budget financing,” said Ms Julie Kozack, the spokeswoman of the IMF while responding to a question.
She added that the EFF loans are not transferred to the government to support the budget.
India has launched a malicious campaign against Pakistan despite being the aggressor. Pakistan on Friday accused India of sponsoring terrorism and killing innocent children in Balochistan.
Miss Julie said that the IMF financing is provided to members for the purpose of resolving balance of payments problems. She said that there are additional safeguards to ensure that the money is used only for the agreed purposes.
There are “targets on the accumulation of international reserves. It includes a zero target, meaning no lending from the central bank to the government”, said the spokeswoman in a press conference in Washington.
And the IMF programme also includes substantial structural conditionality around improving fiscal management. Of course, any deviation from the established program conditions would impact future reviews under the Pakistan programmes, she added.
Pakistan and the IMF had signed the $7 billion programme in September last year, and so far, the global lender has disbursed $2.1 billion, including giving $1 billion this month by turning down Indian objections.
While responding to a question about India’s decision to withdraw its executive director, Kozack said that the appointment of executive directors is a matter for the member country and it is not a matter for the fund. She said that it is completely up to the country’s authorities to determine who represents them at the fund.
She expressed “regrets and sympathies for the loss of life and for the human toll from the recent conflict, hoping for a peaceful resolution of the conflict.
The spokeswoman said that the IMF executive board approved Pakistan’s EFF program in September of 2024. And at that time the first review was planned for the first quarter of 2025.
“In the case of Pakistan, our board found that Pakistan had indeed met all of the targets. It had made progress on some of the reforms, and for that reason, the Board went ahead and approved the programme,” said Kozack.
She did not disclose the voting pattern at the time of the approval of the $1 billion loan tranche and said that the board decisions are taken by consensus, and in this case, there was a sufficient consensus at the Board to allow us to move forward or for the Board to decide to move forward and complete Pakistan’s review.
At the time of the approval of the new tranche, the IMF had also introduced 11 new conditions, including approval of the new budget by the Parliament in line with the IMF staff’s guidelines.
The next IMF review for the sake of the third loan tranche of $1 billion is tentatively scheduled in September in which the IMF would review the implementation on all these conditions. So far, the IMF has imposed a total of 50 conditions in return of the $7 billion loan, which are relatively more than the conditions imposed under the previous programmes.
