Hi guys,
Some stories make headlines.
Others spark heated Reddit threads.
Today’s topic did both.
Let’s unpack it all - no jargon, just straight talk
📌 IMF gives Pakistan another loan – and India’s not happy
Last Friday (May 9), the International Monetary Fund’s Executive Board approved the release of $1 billion (roughly ₹8,500 crore) to Pakistan under its Extended Fund Facility (EFF).
This isn’t a one-time payout; it’s part of a larger $7 billion, 37-month package that was approved back in September 2024.
With this tranche, Pakistan has now received around $2.1 billion under this arrangement.
But that’s not all.
The IMF also greenlit Pakistan’s request to tap into another credit line, which is the Resilience and Sustainability Facility (RSF), giving them access to an additional $1.4 billion.
Now, let’s talk about who actually pushed this loan through.
The IMF Executive Board’s voting power is far from equal.
The United States alone holds 16.49% of the votes, followed by Japan (6.14%), China (6.08%), Germany (5.31%), France and the UK (4.03% each), and then others like India (2.63%) and Russia (2.59%).
These 10 countries control over 50% of the vote, and almost all of them supported the loan, while India stood isolated.
📌Now, here's where it gets political
In light of recent military escalation between India and Pakistan, New Delhi wasn’t thrilled about this decision.
In fact, India formally expressed its "strong dissent" during the meeting. While IMF rules don’t allow countries to vote against funding decisions, India chose to abstain, sending a clear diplomatic signal.
📌 India’s key concern?
The potential misuse of funds, especially given Pakistan’s track record with debt, and accusations of using external financing for state-sponsored cross-border terrorism.
📌 So, what exactly is the EFF?
Good question.
The Extended Fund Facility is a loan program designed for countries that are struggling with deep-rooted economic issues like poor infrastructure, weak banking systems, high public debt, and governance problems.
These structural weaknesses create medium-term balance of payments problems, meaning countries can’t afford to pay for their imports or repay debt.
The EFF isn’t a handout. It’s a loan, but with longer repayment terms and deeper reform expectations. Think of it as a financial timeout with homework.
📌 And, why does Pakistan qualify?
While Pakistan might be investing in missiles and war games, its economy is gasping for breath.
Its GDP has barely grown over the past decade; in fact, in 2023, it was lower than it was in 2017, at just $338 billion. Meanwhile, inflation has been spiraling out of control:
2020: 10.7%
2021: 8.9%
2022: 12.2%
2023: 29.1%
2024: 23.4%
Basically, something that cost ₹100 in 2019 now costs ₹215.
The reasons?
Chronic economic mismanagement, low savings and investment, poor infrastructure, and minimal female workforce participation.
Over the last 35 years, Pakistan has taken 28 loans from the IMF, not to mention bailouts from China, the UAE, Saudi Arabia, and others.
It’s become a professional borrower, if you will.
📌 So, why did the IMF approve the tranche now?
According to the IMF, Pakistan’s recent policy efforts have shown some positive results. Inflation, they say, hit a low of 0.3% in April. That’s a big deal in a country plagued by price instability.
The government also passed key reforms like the Agricultural Income Tax, and has shown efforts to stabilize the budget.
Moreover, foreign exchange reserves are up, and the central bank has even started cutting interest rates, which is a sign of cautious optimism.
So, while the political environment remains tense, the IMF seems to be betting on Pakistan sticking to its reform path.
So, that’s it for today. If you enjoyed this edition, subscribe to hear from us every day!
See ya 👋