The International Monetary Fund (IMF) has approved the immediate disbursement of $1 billion to Pakistan as part of the ongoing Extended Fund Facility (EFF), a decision that has sparked significant controversy and opposition from India. During a board meeting held on May 9, 2025, in Washington, the IMF also reviewed an additional proposed loan of $1.3 billion under its Resilience and Sustainability Facility (RSF). This latest approval brings the total IMF funding to Pakistan under the EFF to around $2 billion.
India, which abstained from the vote, raised strong objections to the funding, warning that the money could be misused to support state-sponsored cross-border terrorism. The Indian Ministry of Finance issued a statement saying, "Rewarding continued sponsorship of cross-border terrorism sends a dangerous message to the global community, exposes funding agencies and donors to reputational risks, and undermines global values."
Pakistan's Prime Minister Shehbaz Sharif welcomed the IMF's decision, describing it as a "defeat of India’s high-handed tactics" and a sign of international confidence in Pakistan's economic recovery. The Prime Minister's Office (PMO) stated that "Indian attempts to sabotage the IMF programme have failed," accusing India of plotting a conspiracy to divert attention through unilateral aggression.
The IMF's financial assistance is part of a larger $7 billion aid package agreed upon in July 2024, structured over 39 months in seven installments, contingent upon successful implementation of reforms including tax restructuring, energy sector reforms, and adjustments in utility pricing. The staff-level agreement reached in March 2025 included commitments such as the introduction of a carbon levy and tariff revisions.
Despite the optimism expressed by Pakistani officials, the backdrop of military tensions between India and Pakistan complicates the situation. The IMF's decision coincided with reports of the Pakistani military launching weapon-carrying drones and missiles targeting Indian cities and military installations. This escalation has raised alarms about the potential for conflict between the two nuclear-armed nations.
On the same day as the IMF meeting, swarms of Pakistani drones were reported over regions like Jammu and Kashmir, Rajasthan, and Punjab, with civilian casualties reported in Punjab following a drone attack on a residential area. This military activity has intensified following the recent Pahalgam terror attack on April 22, 2025, which killed 26 people, mostly civilians. The attack was attributed to a proxy group of the Pakistan-based terrorist organization Lashkar-e-Taiba, further straining relations.
India's concerns regarding the IMF's financial support for Pakistan are not new. The Indian government has consistently criticized Pakistan's record with IMF reforms and its history of misusing financial aid for military purposes. New Delhi has called for a broader review of the IMF's loans to Pakistan, especially in light of the ongoing hostilities.
The IMF's approval of the $1 billion disbursement was seen by some as a necessary step to stabilize Pakistan's struggling economy. However, India's objections highlight the geopolitical complexities surrounding financial aid in regions marked by conflict. As tensions escalate, the international community watches closely, aware that the stakes are high for both countries.
In summary, the IMF's decision to extend financial support to Pakistan, while seen as a crucial lifeline for its economy, has reignited longstanding tensions between India and Pakistan. The differing narratives from both nations reflect broader issues of trust and accountability in international financial assistance, particularly in volatile regions. As the situation develops, the implications of this funding will be closely scrutinized by global observers and policymakers alike.
