Amid escalating tensions between India and Pakistan, the International Monetary Fund’s (IMF) executive board on Friday approved a new $1.4 billion loan to Pakistan under its climate resilience fund and completed the first review of its $7 billion programme, freeing around $1 billion in immediate funds, despite strong objections from India.
“Pakistan’s policy efforts under the (programme) have already delivered significant progress in stabilising the economy and rebuilding confidence, amidst a challenging global environment,” the IMF said in a statement.
The review approval brings disbursements to $2 billion within the $7 billion programme. No fresh money from the resilience loan was made immediately available.
India Demanded Scrutiny
India has asked the IMF for a broader review of its loans to Pakistan, as tension builds between the nuclear-armed neighbours. An April terror attack on Hindu tourists in Jammu and Kashmir killed 26 and triggered the worst fighting between the countries in nearly three decades.
At Friday’s IMF board meeting, India told the IMF that the Pakistan programme raised concerns about the “possibility of misuse of debt-financing funds for state-sponsored cross-border terrorism.”
Pakistan PM Reacts
Pakistan’s Prime Minister Muhammad Shehbaz Sharif said in a statement that “India’s attempts to sabotage the IMF program have failed.”
The staff-level agreement on both programs was reached before the current hostilities rose.
India Flag Concerns
India on Friday voiced strong objections during a review meeting of the IMF regarding the two major lending programmes for Pakistan. While India abstained from the vote, both proposals were ultimately approved by the IMF board.
In a statement, the Indian Finance Ministry emphasised concerns that unrestricted financial inflows from institutions like the IMF could potentially be diverted for military use or to support cross-border terrorism.
“Though several member nations acknowledged these concerns, the IMF’s ability to respond remains limited by procedural and technical constraints. This reflects a serious shortfall, underscoring the pressing need for global financial institutions to better integrate ethical considerations into their frameworks,” the statement read.
India’s position at the meeting was represented by Parameswaran Iyer, the World Bank’s Executive Director, who has been temporarily given charge after the Indian government curtailed the tenure of K.V. Subramanian.
IMF Reviews Pakistan Programme
In September 2023, the IMF Executive Board approved a 37-month Extended Arrangement under the EFF for Pakistan, amounting to roughly $7 billion, with an initial disbursement of $1 billion. The meeting on Friday was convened to review this ongoing assistance and assess the country’s progress under the programme.
During deliberations, India pointed to Pakistan’s poor track record in implementing IMF-supported reforms and conditions.
It noted that Pakistan has received IMF funds for 28 of the past 35 years, and since 2019 alone, the country has been part of four separate IMF programmes.
India argued that the persistent pattern of borrowing without meaningful structural progress raises serious doubts about the efficacy of continued IMF assistance and its potential misuse.
(With inputs from Reuters)
