ISLAMABAD: The International Monetary Fund (IMF) has firmly rejected Indian claims regarding the misuse of its $7 billion loan programme with Pakistan, clarifying that the funds are exclusively for bolstering Pakistan’s foreign exchange reserves and cannot be used to finance the national budget.
Addressing a press briefing in Washington, IMF spokesperson Julie Kozack stated, “All of the Extended Fund Facility (EFF) disbursements are allocated to the central bank’s reserves. Under the programme, these resources are not used for budget financing.” She reiterated that the loans remain at the central bank level and are not transferred to the government.
India has recently launched a disinformation campaign alleging misuse of the IMF loan, even as Pakistan has accused India of sponsoring terrorism and targeting innocent children in Balochistan.
Kozack stressed that IMF funding is strictly intended to address balance of payments issues. “There are additional safeguards in place to ensure that the money is used solely for the agreed purposes,” she explained. These safeguards include strict targets for accumulating international reserves and a prohibition on lending from the central bank to the government.
The EFF programme also requires significant reforms to improve fiscal management, and any deviation from these conditions could affect future reviews, Kozack warned.
Loan Programme and Future Reviews
Pakistan and the IMF agreed to the $7 billion programme in September 2024. To date, $2.1 billion has been disbursed, including $1 billion in the latest tranche issued this month—despite India’s objections. The next review for the third tranche of $1 billion is tentatively planned for September. So far, the IMF has imposed 50 conditions under this programme, surpassing the number of conditions attached to previous loans.
India’s Executive Director Withdrawal and Humanitarian Concerns
When asked about India’s decision to withdraw its executive director from the IMF, Kozack clarified that this is entirely a matter for the member country and not a concern for the fund. She also extended her condolences for the humanitarian losses in the recent regional conflict, expressing hope for a peaceful resolution.
Programme Approval and New Conditions
Kozack confirmed that Pakistan’s EFF programme was approved in September 2024, with the first review successfully completed in early 2025. “Pakistan had met all the targets and had made progress on some reforms, which enabled the Board to approve the programme,” she said.
She declined to reveal the voting details from the IMF Board’s decision on the $1 billion tranche, saying only that the decision was reached by consensus.
At the time of approving the latest tranche, the IMF introduced 11 new conditions, including parliamentary approval of the new budget in line with IMF staff guidelines. These conditions will be a central focus of the next review.
