India has urged the International Monetary Fund (IMF) to exercise caution while considering a bailout package for Pakistan, raising concerns about the country's track record and potential misuse of funds. This comes as the IMF board is scheduled to review Pakistan's financial situation and its eligibility for further financial assistance.
India's Concerns
India's Foreign Secretary Vikram Misri stated that Pakistan's case is "self-evident to those people who generally open their pockets to bail out this country". He expressed skepticism about the success of previous loan programs extended to Pakistan. India's executive director at the IMF will formally present India's position to the board, which includes a review of loans extended to Pakistan.
Misri also criticized Pakistan's use of IMF funds, alleging that the financial support indirectly enables Pakistan to fund its military-intelligence operations, including groups such as Lashkar-e-Taiba (LeT) and Jaish-e-Mohammed (JeM). He alluded to Pakistan's reputation as the "epicenter of global terrorism" and pointed to the presence of UN-sanctioned terrorists operating within Pakistan's borders.
India's concerns are mounting due to the belief that financial support to Pakistan might be used to fuel cross-border terrorism activities, particularly against India. These concerns have been amplified after the recent terror attack in Pahalgam.
India's Actions
India is actively working to diplomatically and economically isolate Pakistan. This includes urging the Asian Development Bank (ADB) to suspend all funding to Islamabad. India is also engaging with other European nations to push for stricter oversight on international funding to Pakistan.
Pakistan's Perspective
Pakistani officials have stated that the country's $7 billion IMF bailout, secured last year, remains "well on track" and is critical for macroeconomic stability. They also received an additional $1.3 billion in climate resilience funding in March 2025. An advisor to Pakistan's Finance Ministry has said that the IMF program is not just stabilizing Pakistan but also building confidence.
IMF's Stance
IMF loans typically come with strict conditionalities, requiring recipient countries, including Pakistan, to implement structural economic reforms. The IMF board will assess Pakistan's financial assistance package during its meeting. The IMF's review will determine whether Pakistan meets the necessary conditions to unlock the next tranche of funding.
Geopolitical Implications
Escalating tensions between India and Pakistan could jeopardize Pakistan's macroeconomic stability and access to crucial external financing. Moody's has cautioned that further escalation in tensions with India could hamper Pakistan's economic growth and delay its fiscal consolidation efforts, undermining the country's progress toward macroeconomic stability.
Historical Context
Pakistan has received several bailout packages from the IMF over the past decade. For example, it was granted a $6 billion loan in 2019. In September 2024, the Fund approved a $7 billion package, of which $1 billion has been disbursed. In March 2025, the IMF also approved a $1.3 billion loan linked to climate change-related initiatives.
India had cautioned the IMF about a fresh bailout for Pakistan in 2019, when Pakistan was under the Financial Action Task Force's (FATF) scanner for failing to crack down on terror funding. Indian officials warned of possible embarrassment for the IMF, pointing out that Pakistan was already "grey listed" and faced a high probability of being in the "black list," which would severely restrict its financial transactions with other nations.
