Latest news with #SoumyaBhowmick
India Today
5 days ago
- Business
- India Today
On debt bed, Pakistan to hike defence budget amid India's Operation Sindoor
Despite grappling with a deepening financial crisis that is pushing it at bailout mercies, Pakistan has confirmed that it is preparing to increase its defence spending in the next fiscal year, beginning in July. The increase is likely to be announced as the budget is presented on June 2. This comes even as Pakistan reels from military setbacks from India's Operation Sindoor, and the allocation of more funds to the military comes despite Pakistan's dire economic situation. Only last week, the IMF approved a loan tranche of $1 billion (around Rs 8,500 crore). The country is burdened with over $22 billion in external IMF loan made Pakistan the fourth-largest borrower of the multilateral financial body. Pakistan's Planning Minister, Ahsan Iqbal, on Saturday confirmed that the federal government would raise its defence budget for the upcoming 2025-26 fiscal year, citing the recent military escalation with India and New Delhi's suspension of the Indus Waters Treaty as key factors behind the decision, reported Karachi-based newspaper said there was no pressure from the IMF in shaping or finalising the federal announcement came just weeks after Pakistan's federal government, led by the PML(N), reportedly approved an 18% hike in defence expenditure, raising the allocation to over Rs 2.5 trillion in the upcoming budget. It, too, cited the escalation in tensions with India as a key reason for the defence budget SPENDING RISES EVEN AS PAKISTAN'S ECONOMY BLEEDSadvertisementThe increased defence spending amid economic fragility in Pakistan has always been the subject of reliance on bailouts and foreign aid continues to empower its military establishment, even as critical sectors like education, healthcare, and poverty alleviation remain reflects a deeper paradox of elite-driven economic decision-making, where national priorities are often shaped by security concerns over social welfare, according to Soumya Bhowmick, a Fellow at the New Delhi-based Observer Research Foundation (ORF).Pakistani economic journalist Afshan Subohi, in her May 19 column in Dawn, questioned who would bear the cost of the defence hike in a cash-strapped economy. The piece was published after the federal government signalled it would raise the defence budget by 18%."The current tense regional environment likely underpins the government's proposal, endorsed by its largest coalition partner, the Pakistan Peoples' Party, to raise the defence budget by 18 per cent for the next fiscal year. The critical question for a resource-constrained country, however, remains: who will pay for it?" asked in June 2024, Pakistan's defence forces got a nearly 17.6% budgetary hike, amounting to Rs 2.12 trillion (PKR)."Pakistan's tax revenues are relatively modest, but its defense spending is massive, largely because the military is the country's de facto ruler. A bankrupt Pakistan is already receiving one IMF bailout and is seeking another, yet it unveils a 17.6% rise in its big defence budget," geostrategist and academic Brahma Chellaney wrote on X in June PAKISTAN TO HIKE DEFENCE SPENDING AMID TENSIONS WITH INDIAadvertisementIslamabad's announcement of an increase in its defence budget follows India's Operation Sindoor, in which Indian forces targeted terror bases in Pakistan and Pakistan-occupied Kashmir (POK), after the April 22 Pahalgam Sindoor successfully destroyed nine terrorist camps linked to Lashkar-e-Taiba, Jaish-e-Mohammed, and Hizbul Mujahideen in Pakistan and Pakistan-occupied Kashmir, killing over 100 terrorists, including high-value targets like Yusuf Azhar and Abdul Rauf advanced airpower, with precision strikes in a 25-minute operation, exposed gaps in Pakistan's air defence targeting of military and civilian areas made Indian armed forces retaliate by striking key military installations in Pakistan and cripple its air Pakistan's drone and missile attacks on Indian civilian and military infrastructure, Indian air defence systems effectively neutralised Pakistani strikes. Moreover, Indian forces hit key military infrastructure, like airbases at Noor Khan and Rahimyar Khan, where its technological superiority and strategic restraint were on heightened military tensions in the lead-up to India's Operation Sindoor, Pakistani daily The Express Tribune reported in early May that the government was weighing additional hikes to the proposed defence budget to counter "Indian aggression" and boost investment in indigenous research and in response, raised concerns about Pakistan's fiscal priorities, with Foreign Secretary Vikram Misri urging the IMF to reconsider its bailout packages due to the potential misuse of funds for military SPENDING BAILOUT MONEY ON DEFENCE AMID CASH CRUNCHPakistan's reliance on IMF bailouts, 25 loans since 1950, including four in the last five years, reveals its chronic economic instability. Pakistan's loans from the IMF alone stood at $6.2 billion as of March 31, 2025, according to the despite this cash crunch, Pakistan's civilian regime, whose reins lie in the hands of the military, is prioritising defence spending, which already accounts for nearly 18% of the federal the IMF warned that tensions with India could jeopardise Pakistan's fiscal and reform goals, Finance Minister Muhammad Aurangzeb claimed that the recent escalation with India would have "minimal fiscal impact" and could be accommodated within the current fiscal choosing to prioritise defence spending amid economic freefall, Pakistan is once again leaning into its military-first doctrine, despite the long-term risks to its economic recovery and human Watch
Indian Express
12-05-2025
- Business
- Indian Express
Pakistan's IMF bailout shows how the international system accommodates a structurally fragile state
Written by Soumya Bhowmick On April 22, a strike by Pakistan-linked terrorists in Pahalgam killed 26 tourists, sparking one of India's most intense military retaliations in decades under Operation Sindoor. As missile exchanges and drone strikes escalated across the border, a high-stakes diplomatic intervention unfolded, and an unlikely peacemaker stepped in: US President Donald. Trump announced a ceasefire on May 10, declaring it a triumph of statesmanship. However, the International Monetary Fund (IMF), just a day earlier, had approved a $2.4 billion bailout to Pakistan, split between a $1 billion Extended Fund Facility and a $1.4 billion climate-linked Resilience and Sustainability Trust (RST). For Islamabad, it was an economic lifeline; for New Delhi, a case of rewarding belligerence. The sequence — from terror attack to conflict, ceasefire, and cash infusion — suggests that the IMF played more than a financial role, becoming an unlikely but strategic lever in managing a near-war between nuclear rivals. Old habits die hard The United States, as the IMF's largest shareholder with veto power, was likely central to this manoeuvre, offering financial leverage to secure Pakistan's de-escalation. While the IMF and Pakistani officials maintain that the loan terms were negotiated before the conflict, the final approval during peak hostilities reveals a familiar pattern — using economic tools to pursue strategic ends. Historically, Pakistan has received financial rescues aligned with Western interests, from the Cold War to counterterrorism. IMF dollars seem to have served as a discreet peacekeeping mechanism this time, with $2.4 billion becoming the price of avoiding any further showdown. The IMF justified its disbursement to Pakistan based on technocratic success: Inflation down, growth stabilised, and reforms initiated. The $1.4 billion climate-focused RST loan was framed as support for flood-ravaged Pakistan's resilience. Yet the timing raised red flags, especially in India, which protested that such funding might indirectly enable terrorism or military aggression. Even if IMF funds don't buy bullets, they unburden domestic budgets, potentially allowing increased defence allocations elsewhere. This concern is especially pressing in Pakistan's case, where the military retains disproportionate influence over national priorities. In 2025, despite deep economic distress, Islamabad plans to raise its defence budget by 18 per cent, allocating over Rs 2.5 trillion — placing Pakistan 29th globally in military expenditure and signalling where its fiscal emphasis lies. Pakistan's chronic IMF dependence — 24 bailouts since 1958 — is a symptom of deeper governance rot: Tax evasion by elites, lack of structural reform, and economic mismanagement. Every programme has served as a stopgap, never a solution, as entrenched interests resist change. With only about 2.5 per cent of the population filing income tax, the burden falls on people with low incomes, while foreign creditors bridge the fiscal gap. The current IMF loan was both a lifeline and a leash, stabilising the economy but tightening external control. That the IMF is now probing Pakistan's terror finance practices reflects how blurred the line between economic and security reform has become. A structural benchmark under the loan programme mandated the release of a comprehensive Governance and Corruption Diagnostic Assessment (GCDA) by July 2025. The GCDA is intended to identify systemic corruption risks and recommend reforms to bolster transparency, institutional resilience, and inclusive growth — areas closely tied to reducing illicit financial flows, including those that may fuel terrorism. Yet by March 2025, Pakistan had set up a high-level Cabinet Committee to weigh whether to release the full report or only a selective summary, raising fresh doubts about the credibility of these commitments. Despite this hedging on transparency, the IMF's continued engagement reflects the uncomfortable balancing act it often performs between enforcing reform and preserving strategic interests. The great powers' pawn? Pakistan's location — bordering China, India, the Arabian Sea, and its proximity to Central Asia — makes it a prized pawn in great power politics. For China, it's a gateway for trade and a pressure point on India, anchored by the China-Pakistan Economic Corridor (CPEC). For the US, despite its pivot to India, Pakistan remains a significant player due to its strategic position and nuclear capabilities. China and the US enable Pakistan's dysfunction for strategic gain — Beijing through investment, Washington through multilaterally backed liquidity, while Islamabad exploits its economic fragility as leverage. The current IMF bailout underscores how the international system continues to accommodate a geopolitically pivotal yet structurally fragile terror-breeding state. The IMF's intervention may have brought peace, but at a cost to global norms and regional resilience. With food inflation soaring and agriculture underfunded, the climate angle is equally troubling, exacerbated by suspending the Indus Waters Treaty, a critical agreement governing water sharing between India and Pakistan. India's decision to put the treaty in abeyance following the Pahalgam attack has significant implications for Pakistan's water security, primarily as the country relies heavily on the Indus River system for agriculture and drinking water. Finally, the IMF loan also risks diluting anti-terror norms: Rewarding a state still linked to proxy warfare sends a troubling message. If financial institutions compromise principles for short-term peace, they may unintentionally fund future conflicts. This moment demands vigilance, not complacency, from those who finance global stability with accountability. The writer is a Fellow and Lead, World Economies and Sustainability at the Centre for New Economic Diplomacy (CNED) at Observer Research Foundation (ORF)
Time of India
02-05-2025
- Business
- Time of India
Pahalgam attack fallout: India plans drive to starve Pakistan of funds from global agencies
This is an AI generated image NEW DELHI: India is looking to mount a global offensive against Pakistan, which it has accused of backing Delhi is set to ask multilateral agencies, including the International Monetary Fund , to have a relook at funds and loans provided to Pakistan, while urging the Financial Action Task Force , the global anti-money laundering agency, to put Islamabad on the grey list. A govt source said India would seek a review of the facilities extended by IMF to Pakistan in recent months to help it avoid bankruptcy and is also in contact with other agencies such as World Bank and Asian Development Bank that is financing projects. Choking of funding to Pakistan will deal a major blow to the fragile economy. Pakistan had managed to secure a $7 billion bailout programme from the IMF last year and was granted a new $1.3 billion climate resilience loan in March. The IMF executive board is scheduled to meet Pakistani officials on May 9 for first review of the extended funding facility, and request for an arrangement under the resilience and sustainability facility. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Phnom Penh: AI guru Andrew Ng recommends: Read These 5 Books And Turn Your Life Aroun... Blinkist: Andrew Ng's Reading List Undo "IMF must reassess its engagement with Pakistan in light of the April 22 Pahalgam attack, the deadliest one on Indian civilians since the 2008 Mumbai attacks... For IMF, continued financial assistance without stringent conditionalities addressing Pakistan's support for terrorism risks undermining the very objectives of economic stability and reform. Integrating counter-terrorism measures and accountability mechanisms into IMF programmes is imperative to ensure that financial aid does not inadvertently subsidise activities that threaten regional and global security," a paper by ORF's Soumya Bhowmick said. In Jan 2025, the World Bank had approved a $20 billion lending package to Pakistan for the cash-strapped country to overcome its challenges.
