India has expressed its appreciation to the International Monetary Fund (IMF) for imposing stringent conditions on Pakistan as part of its latest bailout package. However, New Delhi has also raised concerns regarding the timing of the financial assistance, particularly in light of recent events. The IMF recently approved a $1 billion disbursement to Pakistan as part of its Extended Fund Facility (EFF), a decision that India has formally protested.
The approved bailout package comes with 11 new conditions that Pakistan must adhere to. These structural benchmarks target critical areas, including improvements in fiscal policy, governance, social protections, energy sector reform, and deregulation of trade and investment. These conditions also reportedly include parliamentary approval, increases in debt servicing surcharges in electricity, and the lifting of import restrictions. India acknowledges that these conditions, if effectively implemented, could contribute to long-term economic stability in Pakistan.
Despite acknowledging the IMF's efforts to ensure accountability through these conditions, India has questioned the timing of the bailout. This financial support coincides with heightened tensions between the two countries, particularly in light of India's Operation Sindoor, which targeted terror facilities in Pakistan and Pakistan-occupied Kashmir (PoK), and Pakistan's subsequent response. India has repeatedly stated its concerns about Pakistan's continued support for terrorist activities. Indian Defence Minister Rajnath Singh has gone so far as to describe the IMF aid as a form of "indirect funding to terror". India requested the IMF to reassess the bailout, citing Pakistan's allowance of its territory for state-sponsored terrorist activities against Indian citizens.
India abstained from the IMF vote, citing Pakistan's history of allegedly misusing international funds to support terror operations. Indian Foreign Secretary Vikram Misri urged the Fund to examine Pakistan's record and consider the “reputational risk” of financing a country facing serious allegations of sponsoring terrorism.
The IMF, however, has defended its decision, stating that Pakistan has met all the necessary requirements and achieved progress on key reforms under the EFF program. IMF's communications director Julie Kozack stated, "Our Board found that Pakistan had indeed met all of the targets. It had made progress on some of the reforms, and for that reason, the Board went ahead and approved the program." She also clarified that the funds disbursed are allocated to the central bank's reserves and are not intended for budget financing, adding that the IMF maintains tight control over how the funds are used. Kozack also addressed the conflict between India and Pakistan and hoped for a peaceful resolution.
The IMF's current 37-month EFF program with Pakistan, approved in September 2024, is worth $7 billion in total. The $1 billion tranche, released earlier this month, came after the Fund's staff reached a Staff-Level Agreement with Pakistani authorities in March, which was then endorsed by the Board on May 9. The IMF has provided Pakistan with $2.1 billion in two installments under its Extended Fund Facility (EFF) program, part of a $7 billion agreement signed last year.
Despite India's concerns, experts suggest that India's influence at the fund is limited. It represents a four-country group including Sri Lanka, Bangladesh and Bhutan. Pakistan is part of the Central Asia group, represented by Iran.
While India appreciates the IMF's imposition of conditions aimed at ensuring responsible financial management, it remains wary of the potential for misuse, especially given the current geopolitical climate. New Delhi has urged the IMF and other international organizations to exercise increased vigilance and consider the broader implications of providing financial assistance to Pakistan.
