Lease of Life to Terror

The International Monetary Fund (IMF) has approved an immediate disbursement of USD 1 billion to Pakistan from a USD 7 billion Extended Fund Facility (EFF). Additionally, the IMF granted Pakistan’s request for USD 1.4 billion, with India abstaining from the vote amid escalating cross-border tensions.

IMF’s Controversial Decision

This decision comes at a sensitive time, with Pakistan’s military actions sparking regional concern. The timing of the IMF’s announcement has drawn criticism from Indian officials, strategic experts, and others who fear it may hinder de-escalation efforts.

Given the recent Pahalgam terror attacks, many Indians find it disheartening that the IMF approved Pakistan’s bailout request. The move has sparked a fierce backlash, with implications for regional dynamics.

Pakistan’s Dependence on IMF’s Bailout

Pakistan has entered into 28 agreements with the IMF since 1958, with five deals in the last five years alone. The IMF website states that Pakistan’s outstanding purchases and loans stood at SDR 6229.52 million (approximately USD 8,667 million) as of March 31, 2025.

In terms of voting power, India holds a 2.63 per cent share, while the US, China, and Pakistan have 16.49 per cent, 6.08 per cent, and 0.43 per cent shares, respectively. The collective vote share for India, Bangladesh, Bhutan, and Sri Lanka is 3.05 per cent, represented by one Director at the IMF.

The IMF executive board typically makes decisions by consensus, but when voting is necessary, directors can abstain or vote in favour. Most decisions require a majority of votes cast, while certain decisions need 85 per cent of the total voting power, effectively giving the US a virtual veto with its over 16 per cent voting power.

Given this context, the IMF executive board’s approval of USD 1 billion for Pakistan, with India abstaining, raises questions about the role of global powers in such decisions, especially considering Trump’s claims about his intervention in the Indo-Pakistan ceasefire.

Conditionalities and Contradictions

The IMF’s Extended Fund Facility (EFF) for Pakistan includes structural conditionalities such as parliamentary approval of the FY25 budget in line with the IMF staff agreement and notifications related to electricity and gas tariff adjustments. These conditions were marked as fulfilled.

However, given Pakistan’s history of frequent IMF bailouts, the effectiveness of the IMF’s programme designs, monitoring, and implementation comes into question. Since 2019, there have been four IMF programmes for Pakistan. If the previous programmes had succeeded in establishing a sound macroeconomic policy environment, Pakistan wouldn’t need such frequent bailouts.

The IMF’s statement claiming Pakistan’s strong fiscal performance seems contradictory to the need for large bailout packages almost every year. This raises doubts about the genuineness of the conditionalities imposed by the IMF. The signals are clear: geopolitics appears to be taking precedence over structural reforms, and the IMF’s actions and statements seem to be contradictory.

The IMF’s decision has drawn criticism from India, which abstained from voting at the IMF meeting. India’s Finance Ministry expressed concerns that the funds could be misused to finance terrorist or military activities, highlighting the need for “moral safeguards” in the IMF’s procedures.

India’s Concerns and Objections

India’s objections stem from its long-held position that the Pakistan government, or at least the deep state, actively funds and supports cross-border terrorism targeting India. The timing of the IMF’s decision is particularly sensitive given the ongoing cross-border tensions and recent ceasefire agreement between India and Pakistan.

Despite the ceasefire, cross-border firing from Pakistan was reported along the Jammu border, raising questions about Pakistan’s commitment to de-escalation. The United Nations Security Council has also questioned Pakistan about the presence of terrorist organisations like Lashkar within its borders. In this context, the IMF’s decision to provide funding to Pakistan has sparked debate and concern.

Conclusion

India’s long standing concerns about the IMF’s support to Pakistan being misused seem validated by Pakistan’s history of IMF programmes. Despite participating in multiple programmes over the past 35 years, including four in the last five, Pakistan’s economy remains unstable and in need of frequent bailouts.

The IMF’s recent decision to disburse funds to Pakistan raises questions about the effectiveness of its programmes and the potential misuse of funds. The dichotomy between financial support and structural reform is stark, with bailouts seemingly fuelling further instability rather than meaningful change.

Fr. John Felix Raj is the Vice Chancellor, and Sovik Mukherjee is an Assistant Professor of Economics in the Faculty of Commerce and Management, both at St. Xavier’s University, Kolkata. Views expressed are personal