Explained: Pakistan's IMF lending history & why India opposes new bailout

In the wake of the Pahalgam terrorist attack that claimed the lives of 25 Indian citizens and one Nepali tourist, India launched Operation Sindoor, targeting terror infrastructure in Pakistan and Pakistan-occupied Jammu and Kashmir (PoJK). This decisive military action has also been matched with strong diplomatic messaging on international platforms like the International Monetary Fund (IMF).

India raises red flags at IMF over lending to Pakistan

At the IMF, India has taken a firm stand against the approval of yet another financial assistance package for Pakistan — a $1 billion Extended Fund Facility (EFF) and a $1.3 billion Resilience and Sustainability Facility (RSF). As an active member of the Fund, India voiced strong reservations over Pakistan’s misuse of global financing, especially in the context of state-sponsored cross-border terrorism.

India’s concerns reflect a growing global unease about whether IMF resources might be misdirected — not for economic reforms — but potentially for purposes that threaten regional and international security.

Pakistan’s long & troubled IMF History: 28 out of 35 years on aid!

India’s position is backed by facts. Since 1989, Pakistan has taken support from the IMF in 28 of the last 35 years. And in the past five years alone, it has undergone four separate IMF programs. If these programs were successful in stabilizing the economy, there would be no need for repeated bailouts.

India argued that this poor track record raises critical questions:

• Are IMF programs for Pakistan designed effectively?
• Is their implementation monitored rigorously?
• Or is Pakistan simply unwilling to follow through?

Military’s Grip on Economy: A root cause of repeated failures

India also drew attention to the entrenched role of Pakistan’s military in economic matters, which contributes to policy slippages and stalling of reforms. A 2021 UN report described Pakistan’s military-run businesses as the country’s largest conglomerate. Today, the army also leads the Special Investment Facilitation Council, blurring the lines between civilian economics and military power.

In such an environment, IMF-funded reforms are unlikely to be sustainable or effective, especially when military priorities overshadow civilian development.

Misuse of Funds for Terror: India warns of Global reputational risk

India warned that fungible inflows from international lenders like the IMF could be misused for terror-linked activities, directly or indirectly. Rewarding a country that continues to harbor and export terrorism not only puts the region at risk but also exposes international donors to reputational damage.

India highlighted a critical gap in the IMF’s processes — the lack of weightage given to moral and security concerns while approving financing for countries with a record of sponsoring cross-border terror.

IMF’s own report echoes India’s concerns

India also cited the IMF’s Report on the Evaluation of Prolonged Use of IMF Resources, which acknowledged the perception that political factors influence IMF decisions on Pakistan. The report further pointed out that repeated lending has made Pakistan a “too big to fail” debtor, even though its policy track record doesn't justify such repeated support.

India abstains from IMF vote, emphasises Global responsibility

In line with its concerns, India abstained from voting on the proposed IMF lending to Pakistan. The move served as a diplomatic signal — that global financing should not enable state-backed terror. India stressed that economic aid cannot be delinked from global peace and accountability.

IMF must rethink lending to Pakistan amid terror links

India’s strong stand at the IMF underscores a wider truth — repeated bailouts without accountability not only fail economically but also pose geopolitical risks. At a time when India is confronting terror both militarily and diplomatically, its message to the IMF and the global community is clear: funds meant for development must not end up fuelling destruction.