Key Points
- The IMF has approved a $1 billion disbursement to Pakistan under its Extended Fund Facility, bringing total aid under the program to $2.1 billion.
- India abstained from the IMF board vote, warning that the funds could be diverted to support state-sponsored terrorism and criticizing Pakistan’s poor reform record.
- Pakistan’s Prime Minister Shehbaz Sharif called the IMF decision a diplomatic victory and a defeat of India’s “high-handed tactics”.
- The IMF also approved a new $1.4 billion climate resilience loan for Pakistan, raising total recent support to $2.4 billion.
- India and several other IMF members raised concerns about Pakistan’s chronic reliance on bailouts, military involvement in economic affairs, and the risk of undermining global financial norms.
New Delhi: The International Monetary Fund (IMF) has approved an immediate $1 billion disbursement to Pakistan as part of its ongoing Extended Fund Facility (EFF), despite fierce opposition from India. The decision, made during a board meeting in Washington, comes as Pakistan faces mounting economic challenges and heightened scrutiny over its alleged links to terrorism.
India’s Objections: Terror Funding and Accountability Risks
India abstained from the IMF vote and issued a formal protest, warning that the financial aid could be misused to support state-sponsored cross-border terrorism. New Delhi cited Pakistan’s weak monitoring systems, repeated breaches of past promises, and a long-standing pattern of IMF bailouts-28 out of the last 35 years. The Indian Finance Ministry argued that rewarding Pakistan’s “continued sponsorship of cross-border terrorism sends a dangerous message,” exposing international donors to reputational risks and undermining global values.
India also highlighted the entrenched role of Pakistan’s military in economic affairs, referencing a 2021 UN report that identified the military as the country’s largest business conglomerate. This, India warned, increases the risk of policy reversals and misuse of funds, especially as the military now leads key investment councils in Pakistan.
“Had the previous programs succeeded in putting in place a sound macro-economic policy environment, Pakistan would not have approached the Fund for yet another bail-out program,” India’s Finance Ministry stated, questioning the effectiveness of IMF oversight.
Pakistan’s Response: Diplomatic Win and Economic Relief
Pakistan’s Prime Minister Shehbaz Sharif welcomed the IMF’s decision, describing it as a defeat of India’s efforts to block the loan and a sign of international confidence in Pakistan’s economic recovery. The Pakistani government insisted that the IMF support would help stabilize the economy, enable reforms in tax and energy sectors, and promote sustainable growth.
The new $1 billion installment brings total IMF disbursements under the current EFF to $2.1 billion, out of a $7 billion package agreed in July 2024. The program is structured over 39 months in seven installments, contingent on Pakistan implementing reforms such as tax restructuring, energy sector changes, and utility pricing adjustments.
Additional Climate Resilience Funding
Alongside the EFF, the IMF approved a $1.4 billion loan for Pakistan under its Resilience and Sustainability Facility (RSF), aimed at supporting climate resilience and disaster preparedness. The RSF is designed to help vulnerable countries address macro-critical risks related to climate change.
Broader Implications: Regional Security and IMF Credibility
India’s abstention and vocal dissent signal a shift in how international financial aid is viewed in the context of regional security. Indian officials stressed that economic assistance should be tied to strict conditions and credible reforms, not just economic indicators. Several other IMF member countries reportedly echoed India’s concerns, but the Fund’s response was limited by procedural rules.
The IMF, for its part, acknowledged Pakistan’s recent progress in restoring macroeconomic stability but cautioned that risks remain high due to global uncertainty, geopolitical tensions, and persistent domestic vulnerabilities.
Summary Table: IMF Loan to Pakistan: Key Details
| Aspect | Details |
|---|---|
| IMF Disbursement | $1 billion (EFF), $1.4 billion (RSF), total $2.4 billion recent support |
| India’s Position | Abstained from vote, cited terror funding and reform concerns |
| Pakistan’s Response | Called IMF approval a diplomatic victory, focus on economic recovery |
| IMF’s Conditions | Reforms in tax, energy, SOEs, and climate resilience required for further disbursements |
| Regional Impact | Decision comes amid heightened India-Pakistan tensions and terror allegations |
The IMF’s latest lifeline to Pakistan underscores not only the country’s economic vulnerabilities but also the growing intersection of financial aid, regional security, and global governance.
