Why in News?

India raised concerns at the International Monetary Fund (IMF) over the effectiveness of its financial support to Pakistan, citing the latter’s poor track record.

India abstained from voting on the IMF’s decision to disburse $1 billion under a $7 billion Extended Fund Facility and an additional $1.3 billion under the Resilience and Sustainability Facility, emphasizing that the IMF must adhere to procedural and technical norms.

What’s in Today’s Article?

• Extended Fund Facility (EFF)
• Resilience and Sustainability Facility (RSF)
• India’s Abstention at IMF Executive Board
• India’s Key Objections to IMF Assistance for Pakistan

Extended Fund Facility (EFF)

• EEF provides financial assistance to countries facing serious medium-term balance of payments problems because of structural impediments or slow growth.
• It helps countries implement medium-term structural reforms and offers longer program engagement and a longer repayment period.
• Eligibility
  • Available to all IMF member countries facing actual or potential external financing needs.
  • Typically used by advanced and emerging economies; low-income countries may use EFF alongside the Extended Credit Facility (ECF).
    • ECF is a loan program offered by the IMF to low-income countries facing persistent balance of payments difficulties.
• Conditionality
• Countries must commit to structural reforms and policies that maintain macroeconomic stability.
• Disbursements depend on meeting quantitative performance criteria and structural benchmarks assessed holistically.
• Disbursement Process
  • Timing
    • Disbursement can begin immediately after IMF Executive Board approval.
  • Phasing
    • Funds are not disbursed in full at once; released in phases (tranches).

Resilience and Sustainability Facility (RSF)

• RSF provides affordable, longer-term financing to low-income and vulnerable middle-income countries.
• It aims to strengthen macroeconomic resilience and sustainability by:
  • Supporting reforms that address balance of payments (BoP) risks from climate change and pandemic preparedness.
  • Enhancing policy space and building financial buffers against long-term structural challenges.
• Eligibility
  • Eligible countries include:
    • PRGT-eligible low-income countries (PRGT-eligible low-income countries (LICs) are those that qualify for concessional financing from the IMF's Poverty Reduction and Growth Trust (PRGT)).
    • Small states (population < 1.5 million) with GNI per capita < 25x 2021 IDA cutoff.
    • Middle-income countries with GNI per capita < 10x 2021 IDA cutoff.
• Conditionality
  • Each disbursement is tied to a specific reform measure.
  • A measure may include one or more closely related policy actions.
  • All parts of a reform must be completed to trigger disbursement.

India’s Abstention at IMF Executive Board

• India abstained from voting on the IMF loan package for Pakistan during a recent Executive Board meeting.
  • The abstention was not due to lack of opposition but because the IMF does not allow formal “no” votes—only “yes” or abstention are permitted.
• Abstaining allowed India to register strong dissent within IMF rules.
• IMF Voting System Explained
  • The IMF Executive Board has 25 directors, representing countries or groups of countries.
  • Voting power is based on economic size, not one country–one vote as in the UN.
  • The IMF typically makes decisions by consensus.
  • In rare formal votes, members can only vote in favor or abstain—no vote against is allowed.

India’s Key Objections to IMF Assistance for Pakistan

• Prolonged Dependency and Poor Track Record
  • Pakistan has been a frequent IMF borrower, with assistance provided in 28 of the past 35 years, including four programs in the last five years.
  • India noted Pakistan’s poor implementation of IMF conditions and lack of lasting reform.
• Debt Sustainability Concerns
  • Continued bailouts have led to unsustainable debt, making Pakistan a "too big to fail" debtor and creating long-term risks for the IMF.
• Military Dominance and Economic Mismanagement
  • India criticized the Pakistani military’s role in economic affairs, citing lack of transparency and accountability that undermines reforms.
• Use of Funds and Terrorism
  • India strongly objected to funding a country that sponsors cross-border terrorism, warning it poses reputational risks to global institutions and violates international norms.