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India has formally abstained from voting on a $1.3 billion bailout package proposed by the International Monetary Fund (IMF) for Pakistan, pointing to Islamabad’s “poor track record” in managing previous financial aid and expressing serious concerns over potential misuse of funds.
The decision comes at a time of heightened hostilities between the two nuclear-armed neighbours following India’s military strikes under Operation Sindoor, launched in retaliation to the April 22 terror attack in Pahalgam. As part of the operation, India targeted terror infrastructure in Pakistan and Pakistan-Occupied Kashmir.
Concerns Raised at IMF Bailout Board Meeting
At the IMF board meeting held on May 9 in Washington, the international body reviewed two lending proposals for Pakistan: the ongoing $1 billion Extended Fund Facility (EFF) and a new $1.3 billion Resilience and Sustainability Facility (RSF). India, as a responsible and active member of the IMF, abstained from the vote and raised pointed concerns about the efficacy of IMF lending in the Pakistani context.
India questioned whether the programs were achieving their intended goals. “Given its poor track record, and also the possibility of misuse of debt financing funds for state-sponsored cross-border terrorism,” India argued, “the effectiveness of IMF programs in the case of Pakistan is deeply questionable.”
A History of Repeated IMF Bailout
India’s statement underscored Pakistan’s chronic reliance on IMF assistance without demonstrating sustained economic reforms. Since 1989, Pakistan has received IMF disbursements in 28 of the last 35 years. Notably, in the last five years alone—since 2019—Pakistan has entered four separate IMF programs.
“Had the previous programs succeeded in putting in place a sound macro-economic policy environment,” India noted, “Pakistan would not have approached the Fund for yet another bail-out.” This pattern, according to India, raises concerns either about the design of IMF programs or their implementation and monitoring on the ground.
Military’s Oversized Economic Role
India also spotlighted the powerful role of the Pakistan Army in the country’s economic governance. Despite a civilian government being in place, “the army continues to play an outsized role in domestic politics and extends its tentacles deep into the economy,” India stated. Citing a 2021 UN report, which described military-linked businesses as the “largest conglomerate in Pakistan,” India noted that the situation has only deteriorated. The army now reportedly plays a leading role in the Special Investment Facilitation Council of Pakistan.
Questioning the Integrity of the IMF’s Engagement
India flagged findings from the IMF’s own Report on Evaluation of Prolonged Use of IMF Resources, particularly the Pakistan chapter, which acknowledged a “widespread perception that political considerations have an important role to play in the IMF lending to Pakistan.” This, India argued, had turned Pakistan into a “too-big-to-fail” debtor, adding significant risks to global financial institutions and their credibility.
Terror Concerns and Global Accountability
India was unequivocal in linking IMF lending to the risk of indirectly enabling state-sponsored terrorism. “Rewarding continued sponsorship of cross-border terrorism sends a dangerous message to the global community,” India warned. “It exposes funding agencies and donors to reputational risks and makes a mockery of global values.”
The concern that international financial institutions’ fungible inflows could be repurposed for military or terrorist objectives found resonance with several other member countries, though the IMF’s response remained limited by “procedural and technical formalities.”
India concluded that this represents “a serious gap,” underscoring the urgent need for global institutions to integrate moral and ethical considerations into their financial decision-making frameworks.
Also Read: Pakistan Appeals For Loans As India’s Op Sindoor Hits Terror Infrastructure, Economy Struggles
