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On May 9, 2025, the International Monetary Fund (IMF) approved a new $2.4 billion package for Pakistan — a country currently under global scrutiny for its repeated use of terrorism as statecraft and its decades-long dependence on foreign bailouts. Of this amount, $1 billion was granted under the Extended Fund Facility (EFF) to support economic reforms, while $1.4 billion came through the Resilience and Sustainability Facility (RSF) to support climate adaptation.

India, currently engaged in a full-scale military conflict with Pakistan after the Pahalgam terror attack, abstained from the IMF vote. Citing Pakistan's “very poor track record” with IMF programs and the threat of terror fund misuse, India posed a difficult question — should international financial institutions support countries that consistently use terrorism as a strategic tool? Pakistan’s Record on Terrorism: A Documented Pattern Pakistan’s alleged role as a sponsor of terrorism is not merely a regional claim but has been repeatedly highlighted in international forums:

• Osama bin Laden, the al-Qaeda leader responsible for the 9/11 attacks, was killed in 2011 inside a compound in Abbottabad, Pakistan, close to a major military academy. U.S. officials expressed concern about how he remained undetected in such a location.
  
  
• Hafiz Saeed, founder of Lashkar-e-Taiba, the group responsible for the 2008 Mumbai attacks, continued to live and operate in Pakistan for years under limited legal consequences. He is designated a global terrorist by the United Nations Security Council and U.S. State Department.
  
  
• The Financial Action Task Force (FATF), the global terror financing watchdog, kept Pakistan on its Grey List from 2018 to 2022 for failing to act against terror financing and money laundering. FATF noted “serious deficiencies” in Pakistan’s enforcement mechanisms.
  
  
• Multiple attacks, including the 2016 Uri attack, 2019 Pulwama bombing, and various infiltrations along the Line of Control, have been traced to groups operating from Pakistani territory.
  
  

These concerns have been formally raised in international forums and supported by intelligence findings from multiple countries. IMF Lending Criteria and Pakistan’s Eligibility The IMF provides financial assistance to countries facing balance of payments problems and structural weaknesses. Its key programs include:

• Extended Fund Facility (EFF): Provides medium- to long-term assistance to countries implementing economic reforms to address structural issues.
  
  
• Resilience and Sustainability Facility (RSF): Offers affordable, longer-term financing to help countries reduce risks related to climate change and promote macroeconomic stability.
  
  

To qualify, countries are expected to:

• Maintain fiscal discipline and work toward macroeconomic stability.
  
  
• Implement governance and anti-corruption reforms.
  
  
• Cooperate with anti-money laundering and counter-terrorism financing standards.
  
  

According to the IMF, Pakistan has made progress under the EFF program, achieving a primary fiscal surplus of 2.0% of GDP, lowering inflation to 0.3% in April, and increasing foreign exchange reserves to $10.3 billion by April 2025. However, these indicators reflect short-term stability and not necessarily long-term reform or transparency. Repeated Bailouts: Pakistan’s History with the IMF Pakistan has been one of the most frequent borrowers from the IMF:

• Since 1958, Pakistan has entered into 24 IMF programs.
  
  
• In the last 35 years, it has received IMF disbursements in 28 years.
  
  
• Between 2019 and 2025, Pakistan has had four IMF agreements.
  
  
• The current EFF program, approved in September 2024, totals around $7 billion. With the recent review, $2.1 billion has now been disbursed under this facility.
  
  

Critics, including India, argue that such repeated bailouts indicate structural failure and question the effectiveness of the IMF’s conditionalities and monitoring mechanisms in Pakistan’s case. India’s Position and the IMF’s Voting Process India abstained from the IMF vote, citing procedural limitations — IMF rules do not allow Executive Directors to vote “no”; members can either support or abstain.

In its official statement, India’s Ministry of Finance said:

“Rewarding continued sponsorship of cross-border terrorism sends a dangerous message to the global community, exposes funding agencies and donors to reputational risks, and makes a mockery of global values.”
India also warned about the fungibility of funds, where financial assistance meant for reforms could indirectly support military or covert activities, including state-sponsored terrorism. It highlighted the reputational risks to funding agencies and called for ethical considerations to be incorporated into global lending decisions. IMF’s Response and Justification IMF Deputy Managing Director Nigel Clarke stated that Pakistan had made “important progress” in restoring macroeconomic stability. He acknowledged that risks remained high due to global uncertainties and domestic vulnerabilities but endorsed Pakistan’s continued reform path.

The IMF also emphasized that the RSF funds are designed specifically for climate-related measures such as disaster response, water resource management, and climate risk disclosures.

However, IMF officials have so far not responded publicly to the specific concern of potential misuse of funds in contexts involving terrorism or military escalation. Development Goals and Security Priorities in Conflict Zones The IMF’s financial support for Pakistan highlights a complex intersection of economic stabilization and geopolitical risk. While Pakistan’s macroeconomic recovery is presented as justification for ongoing assistance, its record on counter-terrorism, governance, and misuse of international funds raises fundamental concerns.

India’s abstention has sparked a debate that extends beyond bilateral tensions. It forces the international community to ask: Should financial institutions revise their frameworks to include security and ethical considerations in loan decisions — especially when dealing with countries accused of sponsoring terrorism?


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