Washington/New Delhi – The International Monetary Fund (IMF) has approved $2.4 billion in fresh financial support for Pakistan under two separate programs—the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF)—despite strong objections from India, which abstained from voting, citing concerns over Pakistan’s misuse of funds for cross-border terrorism.
Key Details of the IMF Bailout
- $1 Billion Under EFF (Economic Reform Program)
- IMF completed its first review of Pakistan’s $7 billion, 37-month EFF program (approved in September 2024).
- Immediate disbursement of 1billion∗∗,bringingtotalEFFdisbursementsto∗∗1billion∗∗,bringingtotalEFFdisbursementsto∗∗2.1 billion.
- Conditions include fiscal discipline, tax reforms, state-owned enterprise restructuring, and energy sector reforms.
- $1.4 Billion Under RSF (Climate Resilience Program)
- Aimed at helping Pakistan tackle climate change vulnerabilities (floods, water scarcity).
- Focuses on disaster response, water management, and green financing reforms.
India’s Strong Dissent: “Rewarding Pakistan’s Sponsorship of Terrorism”
India, which holds 3.05% collective voting power (along with Bangladesh, Bhutan, Sri Lanka), abstained from voting and raised serious concerns:
✔ Pakistan’s Poor Track Record with IMF Bailouts
- “In 35 years (since 1989), Pakistan has taken IMF loans in 28 years.”
- “Four IMF programs in the last five years (since 2019)—proof of policy failure.”
✔ Risk of Funds Being Diverted for Terrorism
- India warned that IMF money is fungible and could indirectly finance Pakistan’s military and cross-border terror activities.
- “Rewarding a state sponsoring terrorism sends a dangerous global message.”
✔ IMF’s Procedural Limitations
- The IMF has no mechanism to reject proposals, only to approve or abstain.
- India demanded stronger safeguards to prevent misuse of funds.
IMF’s Defense: “Pakistan Meeting Reform Targets”
Despite India’s objections, the IMF praised Pakistan’s progress:
- Primary fiscal surplus of 2.0% of GDP (first half of FY2025).
- Inflation down to 0.3% (April 2025).
- Foreign reserves rose from 9.4B(Aug2024)to9.4B(Aug2024)to10.3B (April 2025).
Nigel Clarke, IMF Deputy MD:
“Pakistan has made progress in restoring stability, but risks remain due to geopolitical tensions and domestic vulnerabilities.”
Global Reactions & What This Means
- India’s Stand: Reinforces its long-held stance that Pakistan misuses international aid while avoiding structural reforms.
- Pakistan’s Relief: The bailout provides short-term economic breathing space but does not address systemic issues.
- IMF’s Dilemma: Caught between geopolitical pressures and economic stabilization mandates.
The Bigger Picture: Will Pakistan Reform or Return for More Bailouts?
✅ Short-Term Gain: Prevents immediate economic collapse but increases debt burden.
❌ Long-Term Risk: Without deep reforms, Pakistan may need another IMF program soon.
India’s Warning:
“The world must question why Pakistan keeps failing despite decades of IMF bailouts.”
Conclusion
The IMF’s decision highlights the challenges of global financial governance, where geopolitical considerations often override accountability. India’s abstention sends a strong message—terror-sponsoring nations should not get unconditional aid.
What’s Next?
- Will Pakistan implement reforms or return for another bailout in 2-3 years?
- Will the IMF introduce stricter anti-terror financing checks?
