A Vicious Loop
(Source: Editorial Page, The Indian Express)
| Topic: GS2: International Relations; GS3: Economic Development, International Institutions |
| Context |
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Pakistan’s Reliance on External Aid
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Pakistan’s economic survival increasingly hinges on repeated IMF loans, despite minimal improvements in fiscal discipline or human development indicators.
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This signals a pattern of aid dependency in Pakistan, where external funding substitutes internal reform.
Misuse and Misallocation of Aid
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Much of the external funding ends up supporting defense budgets or elite corruption.
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The repeated cycle of Pakistan foreign aid misuse weakens long-term economic sustainability and regional stability.
Role of IMF and World Bank in South Asia
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The role of IMF and World Bank in South Asia is now under scrutiny, as their aid often lacks stringent monitoring.
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These institutions are seen as enabling political regimes without demanding adequate structural or governance reforms.
Regional and Global Implications
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India, as a neighbor, is wary of unchecked bailouts being misused to support anti-India elements.
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Global South countries demand reforms in how international institutions disburse and monitor aid.
Also Read: The Indian Express Editorial 29 May 2025
India’s Diplomatic Leverage
- As a rising voice of the Global South, India must advocate:
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Democratic conditionalities in multilateral lending.
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Reforming Bretton Woods institutions to make them inclusive and equitable.
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Way Forward/Recommendation
- To avoid enabling systemic failures, IMF and World Bank must enforce stricter reforms and accountability mechanisms in countries like Pakistan. Aid should be performance-linked, people-focused, and transparent to break the cycle of misgovernance and dependency.
| Practice Question: “Financial aid without accountability creates a cycle of dependency.” Critically evaluate in the context of Pakistan.(10 marks, 150 words) |
