Straightjacketed Lifeline

The International Monetary Fund has added 11 new conditions to its bailout programme for Pakistan, pushing the total to a staggering 50. For a country desperately clinging to financial lifelines, these demands may feel like both a necessity and a noose. From an Indian perspective, however, this latest development is more than a mere neighbour’s economic crisis. Prominent among the fresh conditions are sweeping economic reforms—parliamentary approval of a Rs 17.6 trillion budget, hikes in energy tariffs, implementation of new Agriculture Income Tax laws in the four federating units of the nation, and a shift in industrial energy consumption — all aimed at shoring up revenues and cutting losses. On the surface, these measures may seem economically logical, but they are most likely to hurt ordinary Pakistanis on the ground. The already high inflation rate is squeezing citizens through higher utility bills and reduced subsidies. The new conditions, against this background, seem difficult to implement. One must also not forget Pakistan’s notorious habit of pushing its military objectives—often through terrorism circuits—at the cost of civilian adversities. It is difficult to imagine that the nation’s all commanding military will budge from this position.

For India, what is particularly significant is IMF’s explicit mention of Indo-Pak tensions as a risk factor for the success of its economic plan. It will be a great folly to look at this situation as a mere diplomatic boilerplate. It could, in fact, turn out to be a serious red flag for India. The Fund has essentially acknowledged that Pakistan’s economic progress could unravel if hostilities with India were to flare up again. And those hostilities are not theoretical. The recent exchange of missile and drone strikes between India and Pakistan — following the Pahalgam terror attack in April that claimed 26 Indian lives — reminded both sides how quickly things can escalate. Although a truce was reached by May 10, the simmering hostility remains just beneath the surface. Notably, Pakistan’s defence budget could indicatively be increased to over Rs 2.5 trillion — an 18 per cent jump — even as its economy lies in tatters. Military priorities, clearly, have the chance to trump economic reforms.

For India, this situation seems frustratingly familiar. A struggling, unstable Pakistan — with a military that often tries to distract the public from domestic failures by provoking tensions across the border — is a pattern we have seen before many times. However, the IMF bailout package and subsequent conditions also present a moment of clarity for New Delhi and, in fact, the wider international community. It reaffirms the need to hold Pakistan accountable for how it manages its economy, as well as to see how it behaves as a state actor in the region. Aid, whether from the IMF or elsewhere, cannot be given without conditions that include peace and responsible conduct.

At the same time, India must be careful not to appear gloating or indifferent. While the situation exposes deep flaws in Pakistan’s political and economic systems, instability there has never served India well. Refugee crises, radicalisation, and black market arms flows are not distant hypotheticals but real spillover risks. India must also double down on its own path of stable economic management and strategic restraint. The contrast between the two neighbours could not have been more telling. While Pakistan grapples with loan conditionalities and rising public discontent, India has positioned itself as a global investment destination and a key player in multilateral forums. The deeper truth is this: the prosperity of South Asia cannot be built on instability. Pakistan’s current crisis is a warning of what happens when short-term populism, military overreach, and fiscal recklessness combine. For India, the way forward lies in staying prepared, staying engaged, and above all, staying steady — because a stable neighbourhood is never a one-sided goal.