🚨 UPSC EXAM NOTES presents the March edition of our comprehensive monthly guide. Access it  to enhance your preparation. We value your input - share your thoughts and recommendations in the comments section or via email at Support@upscexamnotes.com 🚨

Critical Topics and Their Significance for the UPSC CSE Examination on May 10, 2025

Daily Insights and Initiatives for UPSC Exam Notes: Comprehensive explanations and high-quality material provided regularly for students

IMF Bailout

For Preliminary Examination:  Current events of national and international Significance

For Mains Examination: GS II - International Organisations

Context:

A day before the International Monetary Fund (IMF) is set to review the financing facilities extended to Pakistan, India’s Foreign Secretary Vikram Misri on Thursday said the Fund’s Board should look “deep within” and take into account the facts before generously bailing out the country

Read about:

What is IMF bailout?.

Instances of IMF bailout 

Key takeaways:

• The International Monetary Fund (IMF) supports countries facing economic crises by offering financial assistance. This support helps nations implement necessary policy adjustments to restore stability and foster growth. In addition, the IMF offers precautionary funding to guard against potential crises. The institution continually updates its lending instruments to better suit the evolving needs of member countries.

• In contrast to development banks, the IMF does not finance individual development projects. Its focus is on aiding countries in crisis by providing temporary financial relief while they enact economic reforms. The IMF also extends precautionary lines of credit to prevent potential financial turmoil. Its range of lending programs is regularly adapted to stay aligned with changing global economic conditions.

• Economic crises can arise from a complex mix of domestic and international factors. Internally, poor fiscal and monetary decisions can lead to unsustainable deficits and mounting public debt. An inflexible or misaligned exchange rate can reduce a country’s competitiveness and drain its foreign reserves. Weak financial institutions may also contribute to economic volatility. Political instability and fragile governance systems are further domestic contributors. On the external front, countries—especially low-income ones—may be affected by events such as natural disasters or dramatic changes in commodity prices. In a globalized economy, abrupt shifts in investor sentiment can also cause volatile capital flows, impacting even well-managed economies.

• Since joining the IMF in 1950, Pakistan has entered into 25 agreements with the institution. As of March 31, 2025, the IMF’s outstanding loans to Pakistan amounted to 6.23 billion Special Drawing Rights (SDRs).

• Currently, Pakistan is receiving financial support from a $7 billion IMF aid package approved in September 2024. This package is structured under a 37-month Extended Fund Facility, which includes six performance reviews. The disbursement of the next installment, approximately $1 billion, is dependent on the successful completion of the upcoming review.

• Parameswaran Iyer, who serves as the Executive Director at the World Bank, has been temporarily assigned as India’s representative on the IMF Board. He will attend the significant Board meeting scheduled for May 9. This appointment follows the early termination of Krishnamurthy V. Subramanian’s term as India’s Executive Director at the IMF, which ended six months prior to its original conclusion.

• Amid escalating tensions with Pakistan, the Indian government plans to engage with various multilateral development banks to discourage further lending and financial assistance to Pakistan, according to a