IMF Bailout for Pakistan Under Scrutiny as India Urges Caution
| 2025-05-09
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India urges IMF to reconsider bailout for Pakistan, citing lack of reform and links to terror financing ahead of critical May 9 board meeting.
As the International Monetary Fund convenes in Washington on May 9 to review Pakistan’s progress under a $7 billion loan programme, India has signalled its intent to formally raise concerns over continued financial assistance to Islamabad.
Speaking on the eve of the meeting, Indian Foreign Secretary Vikram Misri questioned the effectiveness of previous IMF interventions in Pakistan, citing a history of failed programmes and what India views as a lack of structural reform.
“There have been several IMF bailout programmes sanctioned over the last three decades. I think you would also have an idea on how many of those programmes have reached successful conclusions—probably not many,” Misri said during a briefing in New Delhi. He added that IMF board members “must look deep within themselves and look at the facts” before approving further financial support.
The IMF is currently implementing a 37-month Extended Fund Facility for Pakistan, approved in September 2024. The programme includes six reviews, with the next tranche—worth approximately $1.3 billion—contingent on Islamabad meeting its reform targets.
According to IMF data, Pakistan has entered into 25 funding arrangements since joining the Fund in 1950. As of March 31, 2025, it owes the IMF the equivalent of 6.23 billion Special Drawing Rights (SDRs).
India’s Role at the IMF
India’s position at the board meeting will be presented by Parameswaran Iyer, the country’s temporary nominee director on the IMF Board and currently the Executive Director at the World Bank. Iyer was appointed following the early termination of Krishnamurthy V Subramanian's tenure.
New Delhi’s message is clear: while Pakistan faces genuine economic hardship, further bailouts must be linked to tangible reforms and increased transparency.
Security Concerns Heighten India’s Stance
India’s hardening position on Pakistan’s access to international finance has also been influenced by recent security developments. On April 22, 2025, a deadly terrorist attack in the Indian town of Pahalgam killed 26 civilians, including tourists. The attack has been attributed to The Resistance Front, a group India says operates with support from Pakistan-based Lashkar-e-Taiba.
The Indian government has since escalated its diplomatic campaign to restrict financial flows to Pakistan, including lobbying multilateral development banks such as the IMF, the World Bank, and the Asian Development Bank.
India is also urging the Financial Action Task Force (FATF), a global watchdog on money laundering and terrorism financing, to consider placing Pakistan back on its 'grey list'—a designation that subjects countries to greater monitoring.
A senior Indian official, speaking anonymously last week, said the country would use its influence to press all major financial institutions to reconsider funding that may be “misused or indirectly channelled” towards activities linked to extremism.
Pakistan’s Economic Challenges
Despite modest improvements in certain macroeconomic indicators, Pakistan’s overall economic recovery remains fragile. The IMF’s South Asia Development Update, published in April 2025, noted that inflation in Pakistan had eased more rapidly than expected and consumer confidence had improved. However, the broader economic momentum remained weaker than projected.
Reforms required under the current IMF programme include expanding the country’s tax base, phasing out costly subsidies, and overhauling loss-making public sector enterprises. Independent policy observers, such as the Observer Research Foundation, argue that these reforms have been repeatedly delayed or diluted, with austerity measures often exacerbating social unrest and economic inequality.
Context: IMF Bailouts and Regional Stability
Since 1958, Pakistan has received nearly two dozen IMF bailouts, most of which have failed to deliver sustainable outcomes. Critics argue that the financial lifelines have often served to postpone meaningful economic reforms, while enabling successive governments to avoid difficult policy choices.
India’s current push for a more stringent review of Pakistan’s IMF funding marks a significant departure from traditional diplomatic restraint. By explicitly linking financial assistance to national security concerns, India is broadening the debate over how multilateral institutions evaluate bailout requests in politically sensitive regions.
In his remarks, Foreign Secretary Misri emphasised that donor countries and financial institutions must weigh the long-term implications of their decisions. “The case with regard to Pakistan should be self-evident to those people who generously open their pockets to bail out this country,” he said.
As the IMF Board deliberates on May 9, the meeting is expected to be more than just a technical review. It may also serve as a test of how far international institutions are willing to go in balancing economic aid with geopolitical accountability.
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