Last week the International Monetary Fund (IMF) approved a $1bn (£756m) bailout to Pakistan – a move that drew sharp disapproval from India as military hostilities between the nuclear-armed neighbours flared, before a US led ceasefire was unexpectedly declared.

Despite India’s protests, the IMF board approved the second installment of a $7bn loan, saying Islamabad had demonstrated strong programme implementation leading to a continuing economic recovery in Pakistan.

It also said the fund would continue to support Pakistan’s efforts in building economic resilience to “climate vulnerabilities and natural disasters”, providing further access of around $1.4bn in funding in the future.

In a strongly worded statement India raised concerns over the decision, citing two reasons.

Delhi questioned the “efficacy” of such bailouts or the lack thereof, given Pakistan’s “poor track record” in implementing reform measures. But more importantly it flagged the possibility of these funds being used for “state-sponsored cross-border terrorism” – a charge Islamabad has repeatedly denied – and said the IMF was exposing itself and its donors to “reputational risks” and making a “mockery of global values”.

The IMF did not respond to the BBC’s request for a comment on the Indian stance.

Even Pakistani experts argue that there’s some merit to Delhi’s first argument. Pakistan has been prone to persistently seeking the IMF’s help – getting bailed out 24 times since 1958 – without undertaking meaningful reforms to improve public governance.

“Going to the IMF is like going to the ICU [intensive care unit]. If a patient goes 24 or 25 times to the ICU then there are structural challenges and concerns that need to be dealt with,” Hussain Haqqani, former Pakistani ambassador to the US, told the BBC.

But addressing Delhi’s other concerns – that the IMF was “rewarding continued sponsorship of cross-border terrorism” thereby sending a “dangerous message to the global community” – is far more complex, and perhaps explains why India wasn’t able to exert pressure to stall the bailout.

India’s decision to try to prevent the next tranche of the bailout to Islamabad was more about optics then, rather than a desire for any tangible outcome, say experts. As per the country’s own observations, the fund had limited ability to do something about the loan, and was “circumscribed by procedural and technical formalities”.

As one of the 25 members of the IMF board, India’s influence at the fund is limited. It represents a four-country group including Sri Lanka, Bangladesh and Bhutan. Pakistan is part of the Central Asia group, represented by Iran.

Unlike the United Nations’ one-country-one-vote system, the voting rights of IMF board members are based on a country’s economic size and its contributions – a system which has increasingly faced criticism for favouring richer Western countries over developing economies.

For example, the US has the biggest voting share – at 16.49% – while India holds just 2.6%. Besides, IMF rules do not allow for a vote against a proposal – board members can either vote in favour or abstain – and the decisions are made by consensus on the board.

“This shows how vested interests of powerful countries can influence decisions,” an economist who didn’t want to speak on the record told the BBC.

Addressing this imbalance was a key proposal in the reforms mooted for the IMF and other multilateral lenders during India’s G20 presidency in 2023.

In their report, former Indian bureaucrat NK Singh and former US treasury secretary Lawrence Summers recommended breaking the link between IMF voting rights and financial contributions to ensure fairer representation for both the “Global North” and the “Global South”. But there has been no progress so far on implementing these recommendations.

Furthermore, recent changes in the IMF’s own rules about funding countries in conflict add more complexity to the issue. A $15.6bn loan by the fund to Ukraine in 2023 was the first of itskind by the IMF to a country at war.

“It bent its own rules to give an enormous lending package to Ukraine – which means it cannot use that excuse to shut down an already-arranged loan to Pakistan,” Mihir Sharma of the Observer Research Foundation (ORF) think tank in Delhi told the BBC.

If India really wants to address its grievances, the right forum to present them would be the United Nations FATF (Financial Action Task Force), says Mr Haqqani.

The FATF looks at issues of combating terror finance and decides whether countries need to be placed on grey or black lists that prevent them from accessing funds from bodies like the IMF or the World Bank.

“Grandstanding at the IMF cannot and did not work,” said Mr Haqqani. “If a country is on that [FATF] list it will then face challenges in getting a loan from the IMF – as has happened with Pakistan earlier.”

As things stand though, Pakistan was officially removed from the Financial Action Task Force (FATF) grey list in 2022.

Separately, experts also caution that India’s calls to overhaul the IMF’s funding processes and veto powers could be a double-edged sword.

Such reforms “would inevitably give Beijing [rather than Delhi] more power”, said Mr Sharma.

Mr Haqqani agrees. India should be wary of using “bilateral disputes at multilateral fora”, he said, adding that India has historically been at the receiving end of being vetoed out by China in such places.

He points to instances of Beijing blocking ADB (Asian Development Bank) loans sought by India for the north-eastern state of Arunachal Pradesh, citing border disputes between the two countries in the region.

[BBC]

With US President Donald Trump due to visit Gulf states this week, a key focus will be securing significant new investment for the US economy.

“President Trump wants the announcement [of more Gulf money for the US],” says economist Karen Young, a senior fellow at the Middle East Institute think tank.

“He wants to have a big poster in a meeting that describes where these investments might go. And some estimation of what they will do to the American economy in terms of job creation or his big push, of course, on domestic manufacturing.”

Trump is due to arrive in the Saudi capital, Riyadh, on Tuesday 13 May, to meet the country’s de facto leader Crown Prince Mohammed bin Salman.

Trump is then expected to attend a summit of Gulf leaders in the city on 14 May, before travelling to Qatar that same day, and then ending his three-day trip in the United Arab Emirates (UAE) on 15 May.

The economic importance of the region to Trump is highlighted by the fact that the visit to Saudi Arabia was due to be the first overseas trip of his second term in the White House. That was before the death of Pope Francis necessitated Trump attending his funeral in Rome towards the end of April.

Saudi Arabia was also the first country that Trump visited during his first term of office, going against the modern practise of US presidents to start with the UK, Canada or Mexico.

Securing new investments in the US from Gulf states, and particularly from their state-backed sovereign wealth funds, will help Trump to signal back home that his “America First” agenda is delivering results.

The presidential visit is drawing top Wall Street and Silicon Valley leaders to Saudi Arabia. A Saudi-US investment forum on 13 May in Riyadh will feature CEOs from BlackRock, Palantir, Citigroup, IBM, Qualcomm, Alphabet, and Franklin Templeton.

The push comes amid economic headwinds, as President Trump’s new import tariffs have significantly disrupted global trade, confidence, and the US economy itself. US economic output fell in the first three months of this year, its first fall in three years.

Back in January, Prince Mohammed said that Saudi Arabia would invest $600bn (£450bn) in the US over the next years. However, Trump has already said that he’d like that to rise to $ 1tn, including purchases of more US military equipment.

According to Ali Shihabi – a Saudi commentator and author, with close ties to the Saudi government – a number of economic agreements will be signed during the trip.

“These deals will further integrate the Saudi and US economies together, joint ventures in the kingdom, in the United States, procurements of American weapons and goods,” says Mr Shihabi.

Saudi Arabia’s sovereign wealth fund, the Public Investment fund (PIF), which controls assets worth $925bn, already has numerous investments in the US. These include Uber, gaming firm Electronic Arts, and electric car firm Lucid.

Meanwhile, the UAE has already committed to investing $1.4tn in the US over the next 10 years, in sectors such as AI, semiconductors, energy and manufacturing. This was announced by the White House in March after the UAE’s national security advisor, Sheikh Tahnoon bin Zayed Al Nahyan, met President Trump in Washington.

Yet Ms Young from the Middle East Institute says that the scale of these investments is not realistic in the short term. She instead says that they are long-term strategic moves, and that the figures should be taken “with a little bit of a grain of salt”.

Regarding specific deals that could be announced during Trump’s visit, it is widely reported that Saudi Arabia will agree to buy more than $100bn of US arms and other military items.

These are said to include missiles, radar systems and transport aircraft.

The US has been a longstanding arms supplier to Saudi Arabia, but in 2021 the then Biden administration stopped selling Riyadh offensive weapons, citing concerns about the country’s role in the war in neighbouring Yemen.

The 2018 killing of Saudi journalist Jamal Khashoggi was also widely reported to be a factor. A US report said that Prince Mohammed had approved the murder.

The Biden White House resumed the sale of these weapons last year. While it cited that the Saudis had stopped bombing Yemen, some commentators said that the US was seeking Saudi assistance to help end the conflict in Gaza and aid its future reconstruction.

Mr Shihabi says Saudi Arabia will be seeking assurances from the White House that the US will implement a “more efficient procurement system”, enabling the Gulf state to access ammunition and military equipment far more quickly and easily.

“The Trump administration is initiating procedures to facilitate those deals. So, it’s expected that this process will improve immediately,” he adds.

Artificial intelligence is the other topic that will dominate the agenda during Mr Trump’s visit. Talks are expected to centre on attracting greater Gulf investment into US tech firms, and boosting the region’s access to cutting-edge American semiconductors.

The UAE and Saudi Arabia have been investing billions of dollars into tech and AI sectors as try to diversify their economies away from oil.

The Emiratis, in particular, are keen to establish themselves as a global AI hub.

Last week, the Trump administration scrapped the Biden-era chip regulations that placed restrictions on exports of advanced US chips to more than 120 countries including the Gulf states.

The White House is expected to draft new rules that would potentially involve direct negotiations with countries like the UAE.

“For the UAE, this is absolutely essential,” says Ms Young. “They are aggressively building out their AI capacity. So, for them getting access to US technology is imperative to be the best.”

While much attention will be on Trump courting Gulf capital for the US, Saudi Arabia is equally focused on drawing American investment into its ambitious Vision 2030 program.

Led by giant construction projects, such as the building of a linear city called The Line, Vision 2030 is central to the Saudi government’s continuing efforts to diversify the country’s economy away from oil.

It also involves pouring resources into entertainment, tourism, mining and sports.

However, foreign direct investment into Saudi Arabia declined for a third straight year in 2024, reflecting persistent challenges in attracting overseas capital.

The fall in global oil prices since the start of the year has further strained Riyadh’s finances, increasing pressure to either raise debt or cut spending to sustain its development goals.

Oil prices tumbled to a four-year low amid growing concerns that a trade war could dampen global economic growth.

The decline was further fuelled by the group of oil producing nations, Opec+, announcing plans to increase output.

Saudi Arabia is part of that group, and some commentators said that the rise was in part a desire to please Trump who has called for lower oil prices.

Other analysts said the reason was more that Opec+ remains confident that the global economy is growing.

The US-Saudi Business Council, is an organisation that aims to boost trade ties between the two countries.

It is hoping that Trump’s visit will push American businesses to explore more opportunities in Saudi Arabia, especially in sectors like AI, healthcare and education.

“The Saudi government is looking heavily to invest in these sectors. There is a very big appetite for Saudi companies to collaborate with American companies,” Hutham Al Jalal, who heads the Riyadh office for the organisation, tells the BBC.

Saudi officials are said to be confident that some deals in these sectors will be secured during Trump’s visit.

For Saudi Arabia, Trump’s visit is about strengthening ties with their longest-standing Western ally – a relationship that grew strained during the Biden years. For President Trump, it is about landing investment deals that can be framed as a win for his economic agenda.

“President Trump is looking for a headline of big investments in America, and he will get that from this trip,” adds Mr Shihabi.

[BBC]