The two news lines “Pakistan receives $1 bn as second tranche from IMF” and “IMF set to release $1.3 bn to B’desh” in newspaper caught my attention. Was it just a mere coincidence that International Monetary Fund (IMF) showered fortune on two of our neighbouring countries Bangladesh and Pakistan, amid political instability, war like tensions across the border and worst bilateral relationship with India.
This would be the second tranche of total $7 billion from IMF to Pakistan under the Extended Fund Facility (EFF) programme. So far, it has given $2.1 billion in two separate instalments. And Bangladesh is getting its fourth and fifth tranches of its $4.7 billion loan programme, $3.3 billion under the Extended Credit Facility (ECF) and EFF arrangements and another $1.4 billion under the new Resilience and Sustainability Facility (RSF).
Normally, when any country faces short of balance payment volatility and need to set policy, IMF offers help through the ECF/EFF and RSF programme. It offers a country funding for short to medium term and allowing borrower to return the funds over a longer duration.
Pakistan: This news of disbursement second loan tranche of $1 to Pakistan becomes significant for India because it came just after successful of operation Sindoor against Pakistan, against the terrorist attack in Pahalgam, Kashmir and despite India’s warning over cross-border terror funding.
Before India and Pakistan negotiated a ceasefire on late afternoon of 10th May 2025 both the sides attacked to each other’s territories by advanced missiles, air strikes and drones for long 87 hours. According to the report the Pakistan air force PAF suffered losses of Rs. 4500 cr. and overall during the operation Sindoor India’s attack inflicted damage estimating worth of Rs. 29000 cr, around $3.4 billion, this is well bigger amount than the loan amount that IMF is going to release. Comparison to the same India’s losses were significantly much lower than Pakistan due to its powerful advanced air defence system which neutralised drones and missiles coming from Pakistan.
After the operation Sindoor, the Pakistani government announced to increase 18%, over Rs. 2.5 lakhs crore in its defence budget 2025-26. In between 2017 to 2025 the budget grew by 12.6% annually. This announcement came when the world data shows at the end of the year 2024 Pakistan’s inflation rate exceeded 23% and the average of 5 years is 16.9%, foreign reserves cover just three months of imports. And with $22 billion external debt and a $25 billion trade deficit. Even under the scrutiny of IMF allocating only 2% of GDP to education and 1.3% to healthcare. Islamabad’s approaches always to push defence first.
Relationship between Pakistan and IMF has spanned seven decades. It started aftermath of partition, the initial phase of fragile economy and then compounded by its war with India in 1947, 1965, and 1971. During 1980s to 2000s IMFs programmes emphasised privatisation and fiscal discipline, however, the initiatives were implemented poorly, mismanaged and increasing expenditure in security. That results the debt ballooned from $10 billion to $43 billion by 2007.
New Delhi raised his serious concern and objecting since beginning of the episode of disbursement of $1 billion. In response the IMF made its stance clear that the financial support gave to Pakistan was a part of an earlier agreement and followed the procedures. Julie Kozack, director of the IMF’s communications department told the IMF executive board had approved Pakistan’s EEF programme in September 2024, they were consistent with the timeline of first review in the first quarter of 2025, the review completed on 9th May 2025 and that they found satisfy in the progress.
She also added that under the program the resources are not the part of Pakistan’s budget financing. They are not transferring the fund to the government to support the budget. However, the disbursement of the second tranche comes on a day when the IMF is holding discission virtually on Pakistan’s upcoming budget in June.
Will this infusion of IMF’s fund boost the economy of Pakistan, well the question is tricky to answer, if we see the past records of Pakistan. The New Delhi highlighted the points that despite several IMF’s programmes in the last five years Pakistan failed to recover from its economic instability. Pakistani military is having persistent role in economic and political affairs; it continues to exert substantial influence over domestic policy and economic decisions. India expressed a severe concern on the ongoing military interference could undermine the initiatives to reform economy, rather this kind of financial support to Pakistan could lead inadvertently reward the country’s ongoing sponsorship of cross-border terrorism and that might be reputational risks of international institutions.
Bangladesh: On the other side, Bangladesh got $ 1.3 billion fund that covers fourth and fifth tranches out of its seventh instalments over 42 months programme. In the fourth review meeting at Dhaka focused on critical reforms in revenue management, fiscal policy, and the foreign exchange regime. Both the parties reached a staff-level agreement in the review on the revenue management, currency exchange rate and other reform frameworks, the IMF agreed to release $1.3 billion set for the fourth and fifth instalments together by June.
The overall loan package $4.7-billion was much needed to Bangladesh, so approached to IMF in 2023, as its foreign reserves were pressured due to a global surge in commodity prices triggered by Russia-Ukraine war, straining its ability to pay for key imports of fuel and gas.
It is noticed that in the first half of fiscal year 2024-25, Bangladeshi economy is under considerable strain as its GDP growth slowed down to 3.3%. However, a modest rebound to 3.8% is projected for the full year. Inflation reached to double digits earlier in the fiscal year, it is expected to fall to around 8.5% by the year end. However, the IMF warned that risks remain tilted to the downside, citing issues within the banking sector and ongoing global uncertainty.
To overcome from these challenges, the IMF has emphasised to tight the near-term policy measures, alongside longer-term structural reforms. These include strengthening governance, improving transparency, and enhancing the business climate to attract foreign investment and diversify exports beyond the ready-made garment sector.
In addition to $ 1.3 billion from IMF Bangladesh also expects from Asian Infrastructure Investment Bank (AIIB), Japan, World Bank, Asian Development Bank (ADB), and OPEC Fund for International Development, would support $2 billion.
Here the obvious questions come in our mind that so much funds are flowing in the country to save from the insolvency and to develop peoples’ life. How these funds would utilize properly and effectively for the purpose for which it is being given. To meet out the IMF’s conditions Dhaka has dissolved their National Board of Revenue (NBR). It is replaced by the two division under the finance ministry to handle tax policy, collection and administration.
However, the facts we cannot ignore, the Bangladesh, the country is running by the interim government, no formal electoral government since August 2024, and it seems there would be no chance of election in near future to make a stable electoral government. And on the issue of Myanmar corridor Bangladesh army seems odd with the government and demanding to conduct election in the country to make a stable permanent government.
Overall Dhaka faces a sever political crises, practically no civil government is there, in between IMF releases the fund in the hope and emphasising on strengthening governance, enhancing the business climate to attract foreign investment, improving transparency. The question is who will take care of these, sounds improbable.
Moreover, a few more charted and uncharted facts we cannot ignore. The current interim government of Dhaka was supported by the radical religious groups; this is visible from the recent release of war criminals of 1971 of the country. All of a sudden eye on chicken neck corridor, a new concept born “Guardian of ocean (Bay of Bengal)” and invitation to China for development in the province are coming out from nowhere.
Since the fall of Sheikh Hasina’s government amid violent disturbances in August 2024, prompting her to flee to India. Dhaka is moving closer to China. The interim government signed deals worth of $2.1 billion in March. China has taken up sensitive projects like Teesta River development, an area of longstanding India-Bangladesh cooperation, raising concerns to India over China’s role in the region.
Conclusion
In the midst of all this, few more developments those cannot be ignored. For Pakistan on an addition to IMF releasing fund, China assures Pakistan of re-lending $3.7 billion loan, mostly in Chinese currency. This would be in commercial loans and will help keeping the foreign exchange reserves in double digit. China does backup to Pakistan and it will be continued, now Bangladesh is also joining the party.
Recently leaders of the banned Jamaat-ud-Dawa (JuD), the group linked to Mumbai terror attack mastermind Hafiz Saeed, claims involvement in last year’s mass protests in Bangladesh that led ouster of former Prime Minister Sheikh Hasina.
We do not want our neighbouring countries to go for bankruptcy insolvency, rather we want they should develop economically and for the same purpose India opened gates to Bangladesh to use our ports to export their goods, now the port restrictions on Bangladeshi goods hitting Dhaka badly estimated loss of $770 million. But, on the other side we cannot ignore and should be watchful from such kind of developments in our neighbourhood, which is threatening to our security, radical religious groups changing the political scenario, attack on minorities and cross-border terror funding.
Author: Partha Pratim Paul
#IMF #International #bailout #displaced_roots #authorpartha
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