IMF’s Approval for Pakistan

The International Monetary Fund (IMF) has authorised the "immediate disbursement" of a billion-dollar bailout to Pakistan's troubled economy. The Washington-based global lender said its decision allows for an "immediate disbursement of around USD 1 billion, bringing total disbursements under the arrangement to about USD 2.1 billion". 

Who Decides at the IMF?

• At the core of the IMF’s governance structure is the Executive Board, which is responsible for making most of the operational decisions—including approvals of loans, reviewing economic performance, and setting policy directions.
  • The Executive Board consists of 25 Executive Directors.
  • Each Director represents either one country (like the S., China, India) or a constituency/group of countries (especially smaller or developing economies that pool their representation).
  • The Board meets regularly in Washington, D.C., and acts like the IMF’s steering committee.
• How Do They Vote? – Weighted Voting System
  • Unlike the UN's "one country, one vote" system, the IMF uses a "quota-based" voting system.
  • A country’s voting power is proportional to its economic size—i.e., the bigger and richer your economy, the more say you have.
• No “No” Votes – Only “Yes” or “Abstain”: In IMF decision-making, Executive Directors cannot vote “No.”
• The only options are:
  • Yes
  • Abstain (used to show dissent or reservations). Abstention becomes the strongest form of protest within the IMF framework. It signals non-approval without breaching procedural norms.

India’s Role and Recent Abstention

• India is a member of the Executive Board and represents a constituency of South Asian countries.
• In the recent case of IMF loans to Pakistan, India chose to abstain to express strong disapproval, citing:
  • Risk of funds being misused
  • Pakistan’s track record with previous programmes
  • Security concerns related to terrorism

India's Objection:

India has strongly objected to the IMF's financial support to Pakistan.

• Misuse of Funds: India fears that financial assistance may be diverted to support state-sponsored terrorism, especially cross-border terrorism targeting India.
• Poor Track Record: Pakistan has a history of non-compliance with IMF conditions. India argues that repeated bailouts without accountability undermine the credibility of reform-based lending.
• Geopolitical Risk: Such funding may indirectly empower military establishments in Pakistan, especially when India-Pakistan tensions are high.
• Reputational Risk: Lending to a country with unresolved issues of terrorism and non-transparency risks the IMF’s global reputation and its commitment to responsible governance.

India abstained from the vote and issued a strong protest note, saying this support sends a "dangerous message" to the global community.

IMF and Lending Controversies

• Western Dominance: Decision-making is heavily influenced by major shareholders like the USA, leading to charges of geopolitical bias.
• Austerity Burdens: IMF programmes often impose harsh conditions like subsidy cuts, tax increases, and privatisation—these hurt the poor and increase inequality.
• Moral Hazard: Countries that repeatedly fail to reform may still receive bailouts, encouraging irresponsible economic behaviour.
• Lack of Local Context: IMF’s one-size-fits-all approach ignores ground realities in borrowing countries.
• Undermining Sovereignty: IMF-mandated reforms are often seen as external interference in national policymaking.