India Raises Concerns Over Pakistan’s Investment in NDB

Context:

IMF is conducting its first review of a $7 billion bailout granted to Pakistan in 2023. India has previously abstained from voting on Pakistan’s IMF loan requests but took a stricter stance in January 2024. India urged the IMF to ensure “stringent monitoring” of funds provided to Pakistan to prevent diversion towards defense spending or external debt repayment.

Pakistan’s Plan to Invest in NDB

• Pakistan’s Economic Coordination Committee (ECC) has approved a $582 million investment in the New Development Bank (NDB) for a 1.1% stake.
• NDB, founded by BRICS nations (Brazil, Russia, India, China, South Africa) in 2015, finances infrastructure and sustainable development projects.
• Pakistan argues that the investment will:
  • Strengthen its economic ties with BRICS.
  • Reduce reliance on Western lenders like the IMF.

India’s Objection & Concerns

• India is set to red-flag Pakistan’s investment in NDB when the second tranche of the IMF loan is reviewed.
• The key concerns India will raise:
  • Contradiction: A nation seeking emergency funds from IMF should not simultaneously invest hundreds of millions in another financial institution.
  • Use of IMF funds: India wants to ensure that Pakistan does not divert IMF aid for non-priority expenditures.
  • Lack of financial discipline: Pakistan is in a debt crisis, yet it is using forex reserves for investments rather than economic stabilization.

India’s Prior Stand on Pakistan’s IMF Loans

• In January 2024, during the review of Pakistan’s $3 billion Stand-By Arrangement (SBA), India demanded:
  • Strict monitoring of IMF funds.
  • Checks to prevent misuse for repaying third-country debts or boosting military spending.

Implications & Next Steps

• If India raises formal objections, the IMF board might tighten oversight on Pakistan’s loan utilization.
• Pakistan may have to justify its financial priorities and face scrutiny over its economic strategy.
• The issue could impact Pakistan’s IMF funding prospects and its diplomatic standing in BRICS nations.

This development adds another layer to India-Pakistan tensions and raises questions about Pakistan’s financial strategy amid its ongoing economic crisis.