International Monetary Fund (IMF) logo. Representational image
| Photo Credit: Reuters

The recent remarks of Krishnamurthy Subramanian, Executive Director at the International Monetary Fund, about India’s growth figures does not represent the views of the IMF and were in his role as India’s representative at the global body, the IMF has said.

“The views conveyed… by Mr. Subramanian were in his role as India’s representative at the IMF,” Julie Kozack, IMF spokesperson, told reporters here on Thursday.

She was responding to a question on recent remarks by Mr. Subramanian, in which he projected a growth rate of 8% for India, which is different from the last growth rate projections by the IMF.

Mr. Subramanian, at a event in New Delhi on March 28, had said Indian economy could grow at 8% till 2047, if the country redoubles the good policies that it has implemented over the last 10 years and accelerate reforms.

“So, the basic idea is that with the kind of growth that India has registered in the last 10 years, if we can redouble the good policies that we have implemented over the last 10 years and accelerate the reforms, then India can grow at 8% from here on till 2047,” he had said.

The IMF spokesperson clarified, “We do have an Executive Board. That Executive Board is made up of executive directors who are representatives of countries or groups of countries, and they make up the Executive Board of the IMF. And that’s distinct, of course, from the work of the IMF staff.”

The IMF would be updating its World Economic Outlook in the next couple of weeks. “But our growth projections as of January were for medium term growth of 6.5%, and that was a slight upward revision relative to October. Again, we will be presenting the latest forecast in just a couple of weeks,” Mr. Kozack said.

Pakistan’s Prime Minister Shehbaz Sharif.
| Photo Credit: AP

Taking a tough stance, India has batted for “stringent monitoring” of any emergency funds provided by the International Monetary Fund (IMF) to its financially beleaguered neighbour Pakistan, stressing that such funds must not be redeployed towards defence bills or repayment of loans from other countries.

India’s position was put across to the IMF’s executive board by its nominee, executive director Krishnamurthy Subramanian, during a recent review of an ongoing $3 billion short-term Stand-By Arrangement (SBA) granted to Pakistan by the Fund last July. India has usually abstained from voting on loans sought by Pakistan and did the same last July when the SBA was approved.

Stringent monitoring

In mid-January, when the board reviewed the loan, India’s representative abstained from voting again, following which the IMF released a $700 million tranche to Pakistan. However, this time, the Indian government requested Mr. Subramanian to convey to the IMF board the need to put in place “checks and balances and ensure a stringent monitoring” of Pakistan’s utilisation of IMF money.

“Such monitoring is imperative to ensure that funds received to meet development imperatives are not diverted towards defence spending and repayment of external debt owed to third countries,” India is learnt to have stressed to the IMF’s executive board. The IMF and Mr. Subramanian did not respond to queries from The Hindu till the time of going to press.

Seeking more funds

The development assumes significance as Pakistan’s newly formed government, led by Prime Minister Shehbaz Sharif, is pursuing “immediate talks” with the IMF to seek additional funding support, including the $1.2 billion residual balance under the SBA which expires next month, and beyond.

The IMF’s support had helped cash-strapped Pakistan stave off an imminent external payments crisis that it faced last June when forex reserves had dwindled to just $3.5 billion, barely enough to pay a month’s import bill. Pakistan’s economy — hit by severe floods in 2022, external shocks, and sharp inflation — had contracted in 2022-23. (Its financial year runs from July to June.)

Ahead of the elections, IMF staff had met representatives of Pakistan’s major political parties — the Pakistan Muslim League-Nawaz, Pakistan People’s Party, and Pakistan Tehreek Insaf — to seek confirmation of their support for its lending programme that mandates wide disclosures, deficit goals, and multiple reforms, such as a market-determined exchange rate for its Rupee and tighter anti-corruption steps.

Long-term financing plan

By February, Pakistan’s forex reserves had improved slightly to $8 billion, but were still only sufficient to cover six weeks of imports. After last month’s general election results, Moody’s Investors Service reckoned that Pakistan’s external financing needs will remain high till at least 2026-27, meaning that it will need a longer-term financing plan after its current SBA from the IMF ends.

“Overall, uncertainty around Pakistan’s ability to quickly negotiate a new IMF programme after the current one expires in April 2024 remains very high. Pakistan’s government liquidity and external vulnerability risks will remain very high until there is clarity on a credible longer-term financing plan,” the global ratings major had cautioned.