 "The International Monetary Fund has authorised the \"immediate disbursement\" of a billion-dollar bailout to Pakistan's troubled economy, despite India's objections. Representational image/Reuters")
As India continues to provide a tit-for-tat answer to Pakistan in the ongoing standoff, here’s some bad news for it. The International Monetary Fund (IMF) has authorised a fresh $1.4 billion loan to cash-strapped Pakistan under its climate resilience fund and approved the first review of its $7 billion program, freeing about $1 billion in cash.
The approval of the funds is a blow to New Delhi, who had argued during a Friday meeting that the funds could be misused. It stated at the meeting that there was “a possibility of misuse of debt-financing funds for state-sponsored cross-border terrorism.” In fact, India restrained from the vote as the IMF rules don’t allow members to vote “No”.
Following the authorisation of the cash, Jammu and Kashmir Chief Minister Omar Abdullah hit out at the global agency, saying it was “essentially reimbursing” Islamabad for the ammunition used to devastate border areas of the Union territory.
IMF’s huge bailout to Pakistan
On Friday, even as Pakistan launched drones and missiles towards India for a second continuous day, the Executive Board of the IMF approved two financing decisions for Pakistan, disbursing approximately $2.4 billion under its economic reform and climate resilience programmes.
Following the approval, Pakistan Prime Minister Shehbaz Sharif’s office released a statement saying, “Prime Minister Shehbaz Sharif expresses satisfaction over the IMF’s approval of a $1 billion tranche for Pakistan and the failure of India’s underhanded tactics against it.”
These funds are crucial to the neighbouring nation. Pakistan struggles with high foreign debt and low foreign exchange reserves. It is also struggling with skyrocketing inflation. Islamabad’s external debt jumped to over $130 billion in 2024. In contrast, Pakistan’s forex reserves are pegged at a little over $15 billion, capable of paying for just about three months of imports.
India’s Omar Abdullah lashes out at IMF
Hours after it was reported that the IMF had approved the bailout to the cash-strapped nation, Jammu and Kashmir Chief Minister Omar Abdullah questioned the global body. “I’m not sure how the ‘International Community’ thinks the current tension in the subcontinent will be de-escalated when the IMF essentially reimburses Pakistan for all the ordnance it is using to devastate Poonch, Rajouri, Uri, Tangdhar & so many other places,” he wrote on X.
The chief minister was referencing Pakistan’s actions on Thursday and Friday night — the neighbouring nation has been consistently launching missiles and drones towards India, targeting civilian and military installations. It has also resorted to heavy shelling along the Line of Control, causing civilian and military personnel’s loss of life.
But the Jammu and Kashmir chief minister wasn’t alone in his condemnation of the IMF’s decision to provide funds to Pakistan. An IAS officer also told News18, “When Pakistan secures international funding, particularly from Western-backed institutions like the IMF, any regime in Pakistan often translates that financial relief into geopolitical defiance. Economic crisis may bring Islamabad to the negotiating table for some time, but cash in hand quickly revives the military’s confidence — and its appetite for further and escalated confrontation.”
India abstains from IMF vote on Pak bailout
Omar’s comments came little after it was reported that India had abstained from voting on the bailout to Pakistan. The abstention comes as IMF rules don’t permit for a ‘no’ vote. When votes do occur, members may only vote “in favour” or “abstain.” There is no formal mechanism for a “no” vote or outright rejection of a proposal.
Therefore, abstention is the strongest tool available to display one’s opposition.
Earlier, India had raised concerns about a bailout to Pakistan, even questioning the effectiveness of the ongoing assistance it was receiving. It pointed out to the 28 bailouts that Pakistan has received in the past 35 years, including four programmes in the last five years, yet without achieving meaningful or lasting reforms.
“Pakistan has been a prolonged borrower from the IMF, with a very poor track record of implementation and of adherence to the IMF’s programme conditions,” said India. The continuous financial assistance has resulted in Pakistan accumulating substantial debt, ironically positioning it as a “too big to fail debtor”, India said.
It also said that there were concerns of the bailout money being diverted to state-backed terrorism across borders. New Delhi has been contending that the IMF funds liberate Pakistan’s internal finances — allowing the country to redirect domestic resources to its military-intelligence ecosystem, which is entangled with terror groups such as the Lashkar-e-Taiba and Jaish-e-Mohammed, which continue wreak hell in India through the different attacks that they perpetrate, including the recent Pahalgam one.
Pakistan’s military matters
In its objections to the IMF loan to Pakistan, India also pointed out to the Pakistani military’s continued dominance in economic affairs, which undermines transparency, civilian oversight, and sustainable reform.
It elaborated by using the 2021 United Nations report, which described “military-linked businesses as the “largest conglomerate in Pakistan”.
There is no hiding the fact that Pakistan’s has an outsized role in the country’s affairs. In fact, the country has seen at least four military dictators rule the country since independence in 1947 — most recently Pervez Musharraf, who was ejected from power in 2008. Even when civilian governments have been in power, there is widespread evidence that army chiefs have held considerable sway.
In fact, analysts and officials say that the military’s influence over the country’s civilian government is at its highest level. Moreover, it has been expanding its influence on the economic affairs of the nation. As Madiha Afzal, a fellow at the Brookings Institution in Washington, told the Financial Times, “The military has come to believe that it alone can fix Pakistan, that it alone can guarantee the political stability needed for economic progress and can ensure that the economic ship is righted.”
With inputs from agencies