The International Monetary Fund (IMF) has approved the immediate disbursement of a $1 billion tranche to Pakistan under its ongoing $7 billion Extended Fund Facility (EFF), despite strong objections from India, which cited concerns over terrorism financing and Pakistan’s poor track record with previous IMF programs.
The IMF board also approved a new $1.3 billion Resilience and Sustainability Facility (RSF) for Pakistan, bringing the total potential new lending to $2.3 billion.
India formally objected to the IMF’s proposal, arguing that the funds could be misused to finance state-sponsored cross-border terrorism, especially in light of recent escalations between the two nuclear-armed neighbors. New Delhi highlighted Pakistan’s history of repeated IMF bailouts and its high, unsustainable debt burden, which, according to India, makes Pakistan a “too-big-to-fail” debtor and raises questions about the effectiveness and end-use of IMF assistance.
At the IMF board meeting on May 9, India abstained from voting on the disbursement, signalling its protest and urging caution among multilateral lenders. India’s Finance Ministry emphasised that rewarding Pakistan’s continued sponsorship of cross-border terrorism “sends a dangerous message to the global community, exposes funding agencies and donors to reputational risks, and makes a mockery of global values”. India also pointed to the entrenched role of Pakistan’s military in economic affairs, which it argued increases the risk of policy slippages and reversal of reforms.
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India’s objections were intensified by a recent terror attack in Pahalgam, Jammu & Kashmir, on April 22, which killed 26 people and was claimed by The Resistance Front, a proxy of Pakistan-based Lashkar-e-Taiba. In response, India launched “Operation Sindoor,” targeting terror camps in Pakistan and Pakistan-occupied Kashmir. Pakistan retaliated with drone and missile attacks on Indian military and civilian sites, which were largely intercepted by Indian air defences.
Despite India’s opposition, the IMF stated that Pakistan had made “significant progress” in stabilising its economy, citing strong fiscal performance, a historic low in inflation, and improved foreign reserves. The Pakistani government welcomed the IMF’s decision, with Prime Minister Shehbaz Sharif expressing satisfaction and viewing the bailout as critical for financial stability.
India’s protest at the IMF reflects its longstanding position that international financial aid to Pakistan risks being diverted to support terrorism and military operations against India. The abstention also adds diplomatic pressure on the IMF and other lenders to scrutinise Pakistan’s use of funds and its commitment to structural reforms and counter-terrorism measures.
Meanwhile, the IMF’s decision underscores the complexities of balancing economic stabilisation in Pakistan with regional security concerns, especially as the country remains heavily reliant on international financial support and continues to face allegations of supporting cross-border terrorism.
Agencies
