Explained: Why IMF is facing criticism for granting $1 billion loan to Pakistan

India Today

10-05-2025

The International Monetary Fund (IMF) is facing sharp criticism for approving a $1 billion disbursement to Pakistan just days after a deadly terrorist attack in Kashmir's Pahalgam and amid escalating hostilities between India and Pakistan.The disbursement, approved on Friday under the Extended Fund Facility (EFF), raises total payouts under the programme to $2.1 billion. Additionally, the IMF cleared $1.4 billion under the Resilience and Sustainability Facility (RSF), ostensibly aimed at helping Pakistan tackle climate-related vulnerabilities.advertisementBut the timing of the announcement has provoked a fierce backlash, not just from Indian officials and strategic experts, but also from voices in the region and beyond who say the move could undermine efforts at de-escalation.
It may be noted that India abstained from voting at the IMF Executive Board meeting, reflecting its opposition within the limitations of IMF protocol. Unlike the United Nations, where countries can cast a 'no' vote, IMF board members can only vote in favour or abstain — there is no mechanism for a formal rejection.By choosing to abstain, India signalled strong dissent and used the opportunity to issue a formal objection. In a statement following the vote, the Finance Ministry said the Fund's processes 'lacked moral safeguards,' warning that fungible inflows from multilateral institutions like the IMF could be diverted to fund military or terrorist activities.advertisementThe ministry further stated that these concerns were 'shared by several member countries,' suggesting broader discomfort within the global community.IMF FACES CRITICISMIndian diplomats and foreign policy voices argue that the loan approval sends the wrong signal at a critical moment. Former foreign secretary Kanwal Sibal called the decision 'terrible optics,' adding that the IMF's governance is skewed in favour of Western powers and lacks accountability.Yashwant Deshmukh, a well-known psephologist, went further, saying the IMF 'has blood on its hands.'Similarly, Sushant Sareen of the Observer Research Foundation said the fund was 'emboldening' Pakistan's military establishment, rather than curbing its influence or encouraging reform.India has long argued that IMF support to Pakistan is routinely misused. Over the past 35 years, Pakistan has entered 28 IMF programmes, including four in just the last five years, with little to show by way of structural reform or lasting economic stability.Jammu & Kashmir Chief Minister Omar Abdullah also questioned the global community's logic, asking how de-escalation can be expected when the IMF is 'essentially reimbursing Pakistan' for attacks on Indian cities.Meanwhile, Mariam Solaimankhil, a former Afghan MP in exile, accused the IMF of bankrolling 'bloodshed.' 'The IMF didn't bail out an economy. It bankrolled bloodshed,' she wrote on social media. 'How long will the world pay Pakistan to kill?'Tune InMust Watch