The International Monetary Fund (IMF) has approved a $1 billion loan for Pakistan under its Extended Fund Facility (EFF), despite concerns raised by India regarding fund misuse and economic instability. India, an active IMF member, abstained from voting on the loan, citing Pakistan’s poor track record with IMF programs and the potential risks of debt financing being misused.
India’s Concerns Over IMF Bailouts
India has consistently voiced objections to repeated IMF bailouts for Pakistan, highlighting that:
- Pakistan has been a frequent borrower, receiving IMF disbursements in 28 of the past 35 years.
- The country has undergone four IMF programs since 2019, raising doubts about the effectiveness of past financial assistance.
- Pakistan’s military influence in economic affairs poses risks to reform efforts, with reports describing military-linked businesses as Pakistan’s largest conglomerate.
- India warned that fungible inflows from IMF loans could be misused for state-sponsored activities, including cross-border terrorism.
IMF’s Decision & Global Reactions
Despite India’s concerns, the IMF proceeded with the loan approval, arguing that Pakistan’s economic crisis necessitated urgent financial intervention. The IMF also cleared an additional $1.3 billion under the Resilience and Sustainability Facility (RSF), bringing Pakistan’s total IMF assistance to $2.3 billion.
India’s abstention from voting was seen as a strong dissent, with officials emphasizing the need for greater accountability in global financial institutions. Opposition leaders in India criticized the government’s decision to abstain rather than vote against the loan, arguing that a firm rejection would have sent a stronger message.
Pakistan’s Economic Challenges
Pakistan continues to face severe economic instability, with high inflation, mounting debt, and currency depreciation. The IMF has urged Pakistan to implement structural reforms, including reducing fiscal deficits and improving governance.
With India pushing for stricter oversight on IMF lending, the global financial community remains divided on whether repeated bailouts will help stabilize Pakistan’s economy or further entrench its financial dependence.
