The International Monetary Fund (IMF) has given loans to Pakistan during times of tension between India and Pakistan, particularly in 2025, while India has objected to these loans.
Here is a brief description of the main points: IMF loans to Pakistan:
Recent loans:
In September 2024, the IMF approved a loan of US$7 billion for Pakistan, to be disbursed in installments over 37 months. Of this, $1 billion was released immediately. In March 2025, Pakistan also received a $1.3 billion climate resilience loan (Resilience and Sustainability Facility).
Historical background:
Pakistan has been a member of the IMF since 1950 and has taken loans 25 times since 1958. These loans were often taken due to economic instability, shortage of foreign exchange reserves, and dependence on imports. Tensions in 2025: India-Pakistan tensions escalated after a terrorist attack in Kashmir’s Pahalgam in April 2025 that killed 26 tourists. India alleged that the attackers were Pakistani nationals, which Pakistan denied and demanded an impartial investigation.
India’s opposition:Objection to IMF loans:
India urged the IMF in May 2025 to review Pakistan’s loans, alleging that the funds could be misused to support cross-border terrorism. India opposed the proposal for a new loan of $2.3 billion ($1 billion Extended Fund Facility and $1.3 billion Resilience and Sustainability Facility) at the IMF board meeting on 9 May 2025 and abstained from voting.
India’s argument:
India said that Pakistan has a poor record of implementing IMF programs, and has been receiving loans for 28 of the last 35 years. India also called the Pakistani military’s interference in its economy and politics harmful, describing it as “the largest business group in Pakistan” in a 2021 UN report.
IMF response:
Khurram Shahzad, advisor to Pakistan’s finance minister, said the IMF program was “absolutely on track,” and the latest review was a success. However, the IMF did not directly respond to India’s concerns.
IMF loans to India:
India has not sought loans from the IMF in recent years due to its strong economic position. India is an active member of the IMF and often leverages its position in global economic forums, such as by demanding a review of Pakistan’s loans.
Context of tensions:
Pahalgam attack (April 22, 2025): The attack escalated tensions between the two countries, leading India to suspend the Indus Waters Treaty and close its airspace to Pakistani aircraft.
Economic Impact:
Pakistan’s economy, already struggling with a foreign debt of $130 billion and foreign exchange reserves of just $15 billion, was further damaged by the tensions. Pakistan closed its airspace to Indian aircraft, causing it to lose overflight fees.
IMF Position:
The IMF has appealed for peace between India and Pakistan, but it has continued to lend to Pakistan. At its meeting on 9 May 2025, the IMF approved a $1 billion tranche to Pakistan, despite India’s opposition.
The IMF says its loans are to support economic stability and reforms, but India argues that Pakistan’s military and political instability are hindering the implementation of these reforms.
Conclusion:
The IMF provided significant loans to Pakistan in 2024-2025, including a $7 billion bailout and a $1.3 billion climate loan, despite strong objections from India. India’s main objection was that Pakistan could misuse these funds for terrorist activities and that it has a weak track record in implementing IMF programs.
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On the other hand, India did not need IMF loans due to its strong economy. This situation further complicates the Indo-Pakistan tension on both economic and diplomatic levels.