Sanctimonia Binocs, Bhubaneswar, 30 May 2025
Pakistan Aid: Call for Review Amid Economic & Governance Issues
Recent substantial financial commitments to Pakistan by the International Monetary Fund (IMF) and the World Bank have reignited critical questions regarding the purpose, efficacy, and ultimate beneficiaries of such aid. As Pakistan grapples with severe economic challenges, concerns are mounting that these international lifelines may inadvertently sustain problematic governance structures, enable disproportionate military expenditure, and fail to reach the average citizen, prompting calls for multilateral agencies to deeply introspect on the justification and impact of their lending practices.
The Cycle of Borrowing and Repayment Doubts
Pakistan’s reliance on international financial institutions is significant, with current borrowings from the IMF nearing $8.5 billion. The World Bank has also pledged an additional $20 billion over the next decade. This continuous influx of funds raises a critical concern: the potential for new loans to be used primarily for servicing existing debt, a pattern reminiscent of unsustainable Ponzi schemes. While the IMF’s Extended Fund Facility (EFF) is designed to help countries address balance of payments issues and implement structural reforms, and World Bank lending often targets developmental causes like education and climate resilience, the effectiveness of these interventions in Pakistan remains a subject of debate.
A key issue undermining the intended positive impact of this aid is the lack of rigorous scrutiny over data supplied by recipient countries. Both the IMF and the World Bank, despite needing to account for global stakeholder funds, often rely on information that may not undergo thorough independent verification. This lack of transparency casts a shadow over how these funds are truly utilized.
Transparency Deficits and Governance Questions
The management of Pakistan’s Federal Consolidated Fund (FCF), established under Article 78(1) of its constitution, further illustrates these transparency concerns. While ostensibly similar to federal funds in other nations, encompassing all government revenues and loans, a crucial difference lies in its oversight. Under Article 82 of Pakistan’s constitution, the lower house of parliament can only discuss the FCF; it possesses no voting rights on its appropriations. This contrasts sharply with systems like India’s, where withdrawals from the Consolidated Fund require parliamentary approval and are subject to independent audits, ensuring accountability. This opacity in Pakistan raises significant questions about the end-use of international aid and whether lending agencies are exercising sufficient due diligence.
The governance implications become starker when examining Pakistan’s national budget. For the fiscal year 2024-25, Pakistan allocated nearly $10 billion for defence, an 18 percent increase from the previous year. Despite a struggling economy and a decline in per capita income (from $1,653 in 2018 to $1,459 in 2023, according to the IMF), Pakistan consistently ranks among the top arms importers. Its per capita defence spending in 2024 stands at a significant $41. This disproportionate military expenditure, critics argue, is implicitly supported by international aid that frees up other government resources. There are concerns that funds from the FCF could be diverted towards defence under the guise of legitimate developmental projects, given the limited democratic oversight. World Bank data indicating defence spending at 3.5 percent of Pakistan’s GDP are viewed with skepticism by some analysts, who suspect an underrepresentation of the true figure.
Aid, Military Influence, and Broader Security Risks
The central question emerging is whether loans and grants from multilateral agencies are, directly or indirectly, enabling Pakistan to maintain a large military apparatus and potentially fostering corruption linked to this establishment, all while the average citizen continues to suffer. India has consistently voiced strong protests regarding the end-use of such aid, highlighting the risk of funds being misused, potentially even for financing cross-border terrorism.
These concerns are amplified by Pakistan’s history with the Financial Action Task Force (FATF). Despite being removed from the “grey list” in 2022, based on “high-level political commitment” to reform its monitoring mechanisms, calls persist for Pakistan to demonstrate “credible, verifiable and irreversible” action against terrorism. The FATF and associated bodies like the Asia Pacific Group on Money Laundering are urged to remain vigilant.
Beyond terrorism financing, two broader issues demand international attention. First, democratic nations are called upon to overcome any reluctance in holding accountable a nation that has historically prioritized military and nuclear ambitions, sometimes at the expense of its populace and regional stability. Second, the potential for unrestricted “economic terrorism” and the clandestine proliferation of nuclear materials pose a grave threat to global peace, particularly if international supervision of Pakistan’s stockpiles remains inadequate. The recent elevation of Asim Munir to Field Marshal has also fueled concerns about a potential resurgence of military dictatorship in the nation.
Need for Principled Engagement
The substantial financial aid flowing to Pakistan from the IMF and World Bank necessitates a fundamental re-evaluation by these institutions. There is an urgent need for them to introspect on the true impact of their assistance, ensuring that it promotes genuine economic recovery and development for the Pakistani people, rather than inadvertently propping up a system marked by opaque financial management and disproportionate military influence. Stricter conditionalities, robust independent monitoring, and a clear-eyed assessment of governance realities are crucial to prevent well-intentioned aid from contributing to outcomes detrimental to both Pakistan’s citizens and regional security.
