Pakistan says open to talks with India after IMF flags tensions as loan risk

Pakistan says open to talks with India after IMF flags tensions as loan risk
International Monetary Fund logo is seen outside the headquarters building during the IMF/World Bank spring meeting in Washington DC, US, on April 20, 2018. (REUTERS/File)
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Updated 21 May 2025
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Pakistan says open to talks with India after IMF flags tensions as loan risk

Pakistan says open to talks with India after IMF flags tensions as loan risk
  • Indian Defense Minister Rajnath Singh has called on IMF to reconsider $1 billion loan to Pakistan
  • Finance advisor says structural benchmarks mentioned in the lender’s latest report not new terms

KARACHI: Pakistan on Tuesday hinted that it was open to “constructive diplomatic and economic engagement” with India as the International Monetary Fund (IMF) said prevailing tensions between the two archfoes had increased enterprise risks to Islamabad’s ongoing loan program.

The development comes days after Indian Defense Minister Rajnath Singh said the IMF should reconsider a $1 billion loan to Pakistan alleging it was “funding terror,” a move denounced by Islamabad as proof of New Delhi’s desperation.

India and Pakistan this month clashed in the worst military violence in decades, killing around 70 people before agreeing a ceasefire on May 10. The conflict was sparked by an attack on tourists in Indian-administered Kashmir that New Delhi blamed on Islamabad, a charge it denies.

Khurram Schehzad, adviser to Pakistan’s finance minister, said the Washington-based lender had not imposed any new “conditions” on Pakistan, which continues to pursue stability and responsible governance that supports long-term growth for itself and the region alike.

“Constructive diplomatic and economic engagement in the region, including with neighbors, remains essential,” Schehzad told Arab News, when asked about the recent developments on the fiscal front.

The IMF last week approved a loan program review for Pakistan, unlocking a $1 billion payment which the State Bank of Pakistan said had been received. A fresh $1.4 billion loan was also approved under the IMF’s climate resilience fund.

But the lender last week said the rising India-Pakistan tensions, if sustained or deteriorated further, could heighten enterprise risks to the fiscal, external and reform goals of its $7 billion ongoing loan program for cash-strapped Pakistan.

The IMF loan is vital for Pakistan which is trying to revive its debt-ridden economy that is expected to expand 2.68 percent by June, about one percent lower than the government’s earlier projection.

“Yes, the IMF report identifies regional tensions as a potential risk, as is customary in such assessments,” Schehzad said, adding that at the same time, the Fund had noted that Pakistan’s stocks market had reacted to the conflict modestly and retained most of its recent gains.

“We view this as a reflection of investor confidence in Pakistan’s macroeconomic path.”

Pakistan’s stocks, which rose more than 80 percent last year, have largely resisted selling pressures in recent weeks, despite the country’s conflict with India that saw the two sides strike each other with missiles, drones and artillery.

Schehzad rejected the impression that Pakistan had increased its defense budget and said it remained constant at 1.9 percent of the gross domestic product this fiscal year starting in June 2024.

“The Rs2.414 trillion defense budget cited in the IMF’s staff report is an absolute projection,” he said.

After debt servicing, defense spending is the second biggest drain on Pakistan’s revenues that the country is trying to improve by withdrawing energy subsidies and taxing incomes from agriculture, retail and real estate sectors as one of the conditions set by the IMF under its 37-month Extended Fund Facility (EFF) secured in September.

BUDGET DISCUSSIONS

An IMF team is currently discussing with Pakistan the upcoming federal budget that the country is expected to unveil early next month, said IMF officials privy to the discussions, requesting anonymity as they were not authorized to speak to media.

The talks are expected to conclude “this week” after which the IMF would issue a concluding statement, they told Arab News, without explaining what exactly the two sides were discussing.

The IMF’s latest country report, issued last week, mentioned certain structural benchmarks for Pakistan’s economic reform program that Schehzad said represented the natural progression of the measures already agreed upon, when Pakistan signed the Memorandum for Economic and Financial Policies (MEFP) in September.

“There are not newly introduced conditions. Each step builds logically on the foundations laid in earlier phases of the program,” he said, adding that each structural benchmark the IMF’s report mentioned was part of a sequenced approach to reforms that was designed in phases and built upon progress achieved in the country’s earlier reviews.

Pakistan on May 9 secured the IMF board’s nod for its first review that saw the release of about $1 billion to the cash-strapped country and the approval of the country’s request for a 28-month, $1.4 billion Resilience and Sustainability Facility (RSF) to cope with environmental vulnerabilities.

“These benchmarks are not surprises. They are deliberate follow-ons to earlier milestones,” Schehzad said, citing Pakistan’s parliamentary approval of the next budget in line with the IMF staff agreement as a second step toward the country’s goal of achieving a primary surplus of 2 percent of GDP by FY27.

“The first step was the FY25 budget [presented in June last year], which targeted a 1.0 percent surplus.”

Terming several other IMF structural benchmarks as a continuation of what has been agreed upon with the lender, Schehzad said some new benchmarks were introduced in response to recent developments.

“The plan to publish a post-2027 financial sector strategy and the move to remove the cap on the debt service surcharge are based on new realities, including the recent constitutional amendment and the government’s evolving energy sector reform strategy,” he said.

Other reforms, according to the adviser, included phasing out incentives in Pakistan’s special technology zones and industrial parks by 2035 to ensure a level-playing field, and lifting a ban on the import of used cars to reduce trade barriers was consistent with the trade liberalization goals outlined in the September 2024 MEFP.

The finance adviser confirmed that the remaining 13 actions fall under the separate climate resilience-focused facility, RSF, that were approved by the IMF’s executive board.

“These measures reflect Pakistan’s steady and sovereign commitment to economic reform and transparency, not externally imposed demands,” he said. 


Pakistan’s plan to sharply increase growth faces headwinds — analysts

Pakistan’s plan to sharply increase growth faces headwinds — analysts
Updated 1 min 4 sec ago
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Pakistan’s plan to sharply increase growth faces headwinds — analysts

Pakistan’s plan to sharply increase growth faces headwinds — analysts
  • Pakistan unveils $62.2 billion budget under IMF program
  • Defense spending increased 20 percent after India confrontation

ISLAMABAD: Pakistan is aiming to sharply increase economic growth under its annual federal budget unveiled on Tuesday, but analysts are skeptical about the country’s ability to meet its ambitious goals.

The budget targets higher revenues and a steep fiscal deficit cut under International Monetary Fund (IMF) backed reforms. Yet, defense spending was hiked 20 percent, excluding military pensions, after last month’s conflict with India.

Finance Minister Muhammad Aurangzeb said in a post-budget press conference on Wednesday that customs duties have been cut or removed on thousands of raw materials and intermediate goods.

“Industry here has to be competitive, competitive enough to export,” he said.

But growth drivers remain unclear. The government is targeting 4.2 percent GDP growth in fiscal 2026, up from 2.7 percent this year, which was revised down from an initial 3.6 percent as agriculture and large-scale manufacturing underperformed.

“Pakistan’s GDP growth projection of 4.2 percent appears ambitious given recent performance, and overly optimistic assumptions may place tax targets out of reach,” said Callee Davis, senior economist at Oxford Economics.

Pakistan’s past growth spurts were consumption-led, triggering balance-of-payments crises and IMF bailouts. The government says it now wants higher-quality, investment-driven growth.

Aurangzeb said structural reforms are underway, pointing to East Asia-style pro-market transitions. “This is an East Asia moment for Pakistan,” he said.

“BUDGET KEEPS IMF HAPPY”

The 17.57 trillion rupee ($62.24 billion) budget comes as Pakistan remains under a $7 billion IMF program. Revenues are projected to rise over 14 percent, driven by new taxes and broadening the tax base. The fiscal deficit is targeted at 3.9 percent of GDP, down from this year’s 5.9 percent.

Key reforms include taxing agriculture, real estate, and retail, and reviving stalled privatizations. But revenue shortfalls this year have raised doubts, with both agriculture income tax and retail collections missing targets. Only 1.3 percent of the population paid income tax in 2024, government data shows.

“Pakistan’s budget keeps the IMF and investors happy, even if it comes at a near-term cost to growth,” said Hasnain Malik, head of equity strategy at Tellimer.

“The political setup, with the military firmly in charge, also lowers the risk of protests.”

While overall spending will fall 7 percent, defense will rise after the worst fighting between the nuclear-armed neighbors in decades. Including pensions, defense spending will total $12 billion, 19 percent of the federal budget or 2.5 percent of GDP, matching India’s share, per World Bank data.

The hike was enabled by a sharp drop in interest payments, as the central bank cut policy rates from 22 percent to 11 percent over the past year, easing domestic debt servicing costs. Aurangzeb said cuts in subsidies also helped create fiscal space.

($1 = 282.3000 Pakistani rupees)


Pakistan seeks UK support on Kashmir, Indus Waters Treaty amid India tensions

Pakistan seeks UK support on Kashmir, Indus Waters Treaty amid India tensions
Updated 11 June 2025
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Pakistan seeks UK support on Kashmir, Indus Waters Treaty amid India tensions

Pakistan seeks UK support on Kashmir, Indus Waters Treaty amid India tensions
  • Weeks after worst military confrontation in decades, India and Pakistan have dispatched top officials to press their cases in US, UK
  • Head of Pakistani delegation meets with prominent UK-based Kashmiri leaders and senior British diplomats in London

ISLAMABAD: The head of an official delegation visiting world capitals to present Islamabad’s position following a recent military standoff with New Delhi met senior British officials and Kashmiri diaspora leaders in London this week, urging the UK to play a more active role in defusing tensions with India and restoring the suspended Indus Waters Treaty. 

Pakistan and India have launched parallel diplomatic offensives in world capitals weeks after their worst military confrontation in decades last month saw the two nuclear-armed nations exchange missile, drone and artillery strikes until the US and other allies brokered a ceasefire on May 10. The Pakistan delegation is currently in London after visiting the United States and will go onwards to Brussels. Officials of both countries are lobbying for international support over the disputed region of Kashmir, which both countries rule in part but claim in full. 

In London on Tuesday, Pakistan’s former foreign minister, who is heading the Pakistani delegation, met with prominent UK-based Kashmiri leaders and senior British diplomats, warning of the dangers of rising hostilities and accusing India of violating long-standing international agreements.

“The Jammu & Kashmir dispute remains the unfinished agenda of the United Nations and the unhealed wound of Partition,” Bhutto Zardari said in a post on X, formerly Twitter. “In all my interactions, Kashmir was central— its people’s inalienable right to self-determination under UNSC resolutions must be upheld.

He also accused India of “aggression, violations of sovereignty, and the illegal suspension of the Indus Waters Treaty,” saying the move endangered over 240 million lives in Pakistan and called for its immediate restoration.

Bhutto Zardari separately met with Christian Turner, former UK High Commissioner to Pakistan and now Britain’s incoming Permanent Representative to the United Nations, as part of Islamabad’s push to rally international diplomatic support.

“Welcomed the UK’s emphasis on diplomacy and dialogue, and encouraged its continued, constructive role in supporting de-escalation and encouraging dialogue for resolution of the Jammu & Kashmir dispute, the unfinished agenda of Partition and British legacy,” the Pakistani leader wrote following a luncheon hosted by Pakistan’s High Commission.

The Pakistani outreach coincides with a parallel tour by a senior Indian delegation led by opposition MP and former UN under-secretary Shashi Tharoor, who is lobbying Western allies to support New Delhi’s position that Kashmir is an internal matter and that Pakistan is stoking tensions for political ends. India also accuses Pakistan of backing separatist insurgents and the attacks they carry out, including one in April 22 which triggered the latest conflict. Islamabad denies the charges. 

Pakistan has long maintained that Kashmir is a disputed territory under UN resolutions, while India insists the region’s status was settled after its full constitutional integration in August 2019, a move Pakistan continues to reject as illegal.

The standoff has also drawn concern over shared water resources, particularly the Indus Waters Treaty, a 1960 World Bank-brokered agreement seen as a rare example of cooperation between the two neighbors. Recent Indian actions to suspend the treaty and threaten to halt water flow into Pakistan have added to Islamabad’s grievances.

As tensions grow, both nations are leveraging historic ties with Western powers in an effort to shape the diplomatic narrative. In London, Bhutto Zardari reiterated the need for “restraint, immediate restoration of treaty obligations, and comprehensive dialogue to prevent conflict and secure lasting peace.”

The visits come ahead of a high-level UN session on South Asia later this month, where both Indian and Pakistani envoys are expected to present competing narratives.


Saudi Arabia leads surge as Pakistan’s May remittances hit $3.7 billion

Saudi Arabia leads surge as Pakistan’s May remittances hit $3.7 billion
Updated 11 June 2025
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Saudi Arabia leads surge as Pakistan’s May remittances hit $3.7 billion

Saudi Arabia leads surge as Pakistan’s May remittances hit $3.7 billion
  • Inflows bring total remittances for July-May FY2024-25 to $34.9 billion, a 28.8 percent increase from $27.1 billion in same period last year
  • Saudi Arabia remained largest contributor in May, sending $913.9 million, followed by UAE ($754.2 million), UK ($588.1 million), US ($314.7 million)

KARACHI: Pakistan received $3.7 billion in workers’ remittances in May 2025, a strong 16 percent increase month-on-month and 13.7 percent year-on-year, the State Bank of Pakistan (SBP) said on Wednesday, with Saudi Arabia remaining the largest contributor, sending $913.9 million.

The inflows brought total remittances for July-May FY2024-25 to $34.9 billion, marking a 28.8 percent increase from $27.1 billion in the same period last year. The rise follows a record breaking $4.1 billion in March, the highest-ever single-month inflow, and a robust $3.2 billion in April. 

The strong performance has helped offset Pakistan’s trade deficit and support its fragile foreign exchange reserves amid continued macroeconomic pressure.

“This is the highest level of remittances recorded in recent months,” the SBP said in a statement, noting that the increase reflected stronger flows from key corridors and a growing shift toward formal remittances channels. 

Analysts attribute the surge to a combination of factors, including improved exchange rate management, government crackdowns on hawala and hundi informal systems for transferring money internationally, and seasonal flows during Ramadan and Eid.

Saudi Arabia remained the largest contributor in May, sending $913.9 million, followed by the United Arab Emirates ($754.2 million), the United Kingdom ($588.1 million), and the United States ($314.7 million).

Remittances remain a critical source of foreign exchange for Pakistan, which is currently under a $7 billion IMF program and facing over $24 billion in external debt repayments over the next fiscal year.

The central bank has raised its full-year remittance forecast to $38 billion, reflecting optimism that flows will continue to support economic stabilization.

The surging remittances, especially from Saudi Arabia, help cushion Pakistan’s chronic current‑account deficit and bolster its foreign exchange reserves, offering relief ahead of major debt repayments. With global commodity prices still volatile and external financing constrained, continued inflows from overseas workers, particularly from the Gulf, are seen as crucial to maintaining macroeconomic stability and supporting Pakistan’s growth outlook under IMF conditions.


‘Soaring in the air’: Returning Pakistani Hajj pilgrims praise spiritual experience despite intense heat

‘Soaring in the air’: Returning Pakistani Hajj pilgrims praise spiritual experience despite intense heat
Updated 48 min 6 sec ago
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‘Soaring in the air’: Returning Pakistani Hajj pilgrims praise spiritual experience despite intense heat

‘Soaring in the air’: Returning Pakistani Hajj pilgrims praise spiritual experience despite intense heat
  • Pakistani pilgrims laud Saudi Hajj arrangements as post-Hajj flight operation begins
  • About 1,500 Pakistani pilgrims are scheduled to return to various cities on June 11

ISLAMABAD: Pakistani pilgrims returning from Saudi Arabia on Wednesday praised the smooth organization and facilities provided during this year’s Hajj, despite facing intense heat in the holy cities of Makkah and Madinah.

Pakistan’s post-Hajj flight operation began with the arrival of PIA flight PK732 in Islamabad earlier in the day, carrying 307 pilgrims. According to the Ministry of Religious Affairs, a total of seven flights are scheduled to transport 1,496 pilgrims to Islamabad, Lahore, Multan and Karachi on the first day of the repatriation operation.

“A total of seven flights carrying 1,496 pilgrims will land on June 11, while the post-Hajj flight operation will conclude on July 10 with the last flight landing in Islamabad,” Muhammad Umer Butt, spokesperson for the religious affairs ministry, informed.

Speaking to Arab News at Islamabad International Airport, returning pilgrims praised the Hajj experience, describing it as spiritually uplifting and logistically smooth, crediting the Saudi authorities for their efforts.

“It [Hajj] was very good and an amazing experience,” said Muhammad Waseem from Attock. “It was very hot, but the Saudi government had made good arrangements— there was water and fans everywhere.”

Family members welcome Hajj pilgrims at the Islamabad International Airport in Islamabad on June 11, 2025, upon their return from Hajj. (AN Photo)

He said the Saudi authorities had taken excellent care of the pilgrims and ensured things remained smooth.

Those who followed their group schedules found the experience far less strenuous, he continued.

“Only those people got tired and faced difficulties who did not follow their scheduled timings fixed by the authorities for different groups for the Hajj rituals,” he noted.

Abdul Malik, a pilgrim from Lakki Marwat in Khyber Pakhtunkhwa, echoed similar sentiments.

Family members welcome Hajj pilgrims at the Islamabad International Airport in Islamabad on June 11, 2025, upon their return from Hajj. (AN Photo)

“The arrangements were very good,” he said. “When Allah calls a person to visit His House and the Mosque of His Prophet [PBUH], it feels as if the person is soaring in the air. Such is the feeling which cannot be described in words.”

Samina Bibi from Islamabad called her Hajj deeply spiritual and fulfilling.

“My experience of Hajj was very good and I prayed for everyone, including all the Muslims,” she said. “Only Allah Almighty can understand my feelings during Hajj.”

Bibi informed it was her second visit to the Holy Places, having previously performed Umrah, and found the arrangements to be “very good.”

Abdul Haq, another pilgrim from Islamabad, reflected on the ease with which his journey unfolded.

“When I intended to perform Hajj, after that, Allah made everything easy upon easy, and we prayed for everyone including Muslims sitting in front of the Holy Kaaba,” he said. “The arrangements made by the Saudi government were excellent. We faced no difficulties during Hajj.”

Family members welcome Hajj pilgrims at the Islamabad International Airport in Islamabad on June 11, 2025, upon their return from Hajj. (AN Photo)

While he acknowledged the natural hardships due to the heat in Mina and Muzdalifah, Haq said the experience remained “smooth and truly unforgettable.”

“In Hajj, there were not really difficulties, but there is hardship, mainly due to the heat,” he added. “However, overall, our Hajj was so wonderful that it’s beyond words, and we kept thanking the Saudi government for all the arrangements throughout.”

This year’s Hajj pilgrimage took place from June 4 to June 9, drawing millions of pilgrims to the holy cities.

Pakistan, which sent over 116,000 pilgrims under both government and private schemes, was among several countries managing large-scale contingents in the annual Islamic pilgrimage.


Pakistani deputy PM to attend UN moot on Palestine, reaffirming support for two-state solution

Pakistani deputy PM to attend UN moot on Palestine, reaffirming support for two-state solution
Updated 11 June 2025
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Pakistani deputy PM to attend UN moot on Palestine, reaffirming support for two-state solution

Pakistani deputy PM to attend UN moot on Palestine, reaffirming support for two-state solution
  • Visit underscores Islamabad’s continued diplomatic support for Palestinian cause amid latest Israeli military offensive in Gaza
  • Conference comes amid renewed international efforts to revive stalled negotiations and de-escalate tensions in the region

ISLAMABAD: Pakistan’s Deputy Prime Minister and Foreign Minister Ishaq Dar will travel to New York next week to attend a high-level United Nations conference on the peaceful settlement of the Palestinian question, the Foreign Office said on Tuesday.

The International Conference on the Peaceful Settlement of the Question of Palestine and the Implementation of the Two-State Solution will take place at the UN headquarters from June 17-19.

The visit underscores Islamabad’s continued diplomatic support for the Palestinian cause amid the latest Israeli military offensive in Gaza, which began in October 2023. Around 54,000 people have been killed in the besieged enclave since, mostly women and children.

“DPM/FM shall be traveling to US to attend High-Level Segment of the International Conference on the Peaceful Settlement of the Question of Palestine and the Implementation of the Two-State Solution to be held at UN New York from 17-19 June 2025,” the Foreign Office said in a brief statement.

During his visit, Dar is expected to meet with counterparts from other member states and reaffirm Pakistan’s call for an immediate ceasefire, unimpeded humanitarian access, and a just and lasting resolution to the conflict in line with UN and OIC resolutions.

The conference comes amid renewed international efforts to revive stalled negotiations and de-escalate tensions in the region.

Pakistan has long advocated for a two-state solution based on pre-1967 borders, with East Jerusalem as the capital of an independent Palestinian state.

Islamabad does not recognize Israel and has consistently condemned Israeli military actions in Gaza, especially following Israel’s latest offensive in response to Hamas-led attacks in late 2023, which have resulted in widespread casualties and a humanitarian crisis.