Editorial 2 : For IMF and World Bank, on Pakistan, a query
Context
Multilateral agencies need to introspect about need and justification for aid to Pakistan.
Role of multilateral agencies
- As tensions between India and Pakistan rise, serious questions emerge about the role of multilateral agencies like the IMF and World Bank.
- These institutions continue to offer economic aid to Pakistan, despite repeated warnings that this could be a case of good money chasing bad.
- For instance, the World Bank plans to give $20 billion over the next 10 years, while Pakistan’s current borrowing from the IMF stands at $8.5 billion.
- There is a real concern that new loans are being used to repay old ones, creating a cycle much like a Ponzi scheme.
Questionable Aid Utilization
- The IMF’s Extended Fund Facility (EFF) is meant to support countries with serious payment issues, helping with structural reforms.
- The World Bank claims its lending goes to causes like education and climate resilience.
- However, there is poor data verification by these agencies or third parties, weakening transparency. Aid money’s end use often remains unknown.
- Pakistan’s Federal Consolidated Fund (FCF) — like India’s Consolidated Fund — should ideally promote transparency.
- But unlike India, Pakistan’s parliament cannot vote on it and has limited oversight. This allows funds to be withdrawn without adequate scrutiny or accountability.
Spending Priorities and Lack of Accountability
- In 2024-25, Pakistan allocated $10 billion to defence — an 18% increase from the previous year.
- Even as its economy weakens, the country remains among the top arms importers.
- With per capita income falling to $1,459 in 2023, its per capita defence spending is still high at $41 — only slightly less than India’s $60, despite India’s much stronger economy and defence budget of over $86 billion.
- The concern is whether aid is indirectly enabling excessive defence spending, empowering military control, and fueling corruption.
- Funds withdrawn from the FCF might be disguised under legitimate causes due to weak oversight.
- World Bank data showing Pakistan’s defence spending as 3.5% of GDP appears misleading under these circumstances.
Cross-border Terrorism and FATF’s Role
- India has long protested that such aid might be misused to support cross-border terrorism.
- This concern intensified when the FATF (Financial Action Task Force) removed Pakistan from its grey list in 2022, citing its “high-level political commitment” to reforms.
- India believes the FATF should ensure Pakistan takes “credible, verifiable, and irreversible” action against terrorism, and align with Asia Pacific Group protocols.
Global Security Threats
- Two key issues demand urgent attention.
- First, democratic nations must end their moral hesitation in acting against a nuclear-armed country that once declared it would eat grass to achieve nuclear status even while supporting proxy wars.
- Second, Pakistan may be using multilateral aid to fuel global instability and economic terrorism, similar to Iraq in the past.
- The rise of Asim Munir as Field Marshal signals a potential return to military dictatorship and increases risks of nuclear black-market activity.
Conclusion
The world must not ignore the potential misuse of aid. India’s position is clear: national honour is no longer dictated by trade terms. Multilateral agencies must now act responsibly and ensure strict monitoring of aid before it fuels greater global threats.