India's Struggle to Block IMF Bailout for Pakistan Amid Tensions

Thu Jul 10 2025 14:57:10 GMT+0300 (Eastern European Summer Time)
India's Struggle to Block IMF Bailout for Pakistan Amid Tensions

Despite India’s objections, the International Monetary Fund proceeds with a $1 billion bailout for Pakistan, raising questions about regional dynamics.


Last week, the International Monetary Fund (IMF) approved a critical $1 billion bailout for Pakistan amid heightened tensions between India and its neighbor following flare-ups in military hostilities. The decision was approved unanimously by the IMF board, citing Pakistan's demonstrated progress in economic reform implementation and recovery. Although India expressed its discontent with a strongly-phrased statement, the IMF maintained that it would continue to support Pakistan in building resilience against climate challenges and potential natural disasters, with additional funding of around $1.4 billion anticipated in the future.

India's government raised significant concerns about the bailout, questioning both its effectiveness and the integrity of the program. Particularly troubling for New Delhi was the fear that financial aid could potentially be diverted towards "state-sponsored cross-border terrorism," a claim that Pakistan has consistently denied. Indian leadership called for the IMF to reconsider its funding, highlighting perceived reputational risks for the organization and its donors.

Despite India's strong stance, expert opinions suggest that its ability to exert influence over the IMF remains limited as one of 25 board members, with decisions being heavily weighted toward economic size and contribution levels. The rules of governance within the IMF do not allow for a direct "no" vote, requiring members to either support a proposal or abstain.

Advocates for reform within the IMF argue that the voting rights should be restructured to better represent developing nations, especially in light of recent instances, such as a $15.6 billion loan to Ukraine, which departed from traditionally strict lending rules. The dialog around such reforms intensified during India's G20 presidency in 2023. However, no significant changes have been implemented as of yet.

To tackle its grievances more effectively, some experts suggest India's best recourse might lie in addressing its concerns through the Financial Action Task Force (FATF), which monitors countries' compliance with anti-terror financing measures. With Pakistan no longer on the FATF grey list since 2022, however, the dynamics surrounding that forum could shift.

As India navigates these complex geopolitical waters, experts warn that any push to reform international funding processes carries risk, particularly if it inadvertently increases Beijing's influence rather than India's within multilateral institutions.

In summary, as Pakistan secures vital funding from the IMF, India’s efforts to influence the outcome face constraints both politically and procedurally, suggesting a need for a more multifaceted diplomatic approach to assert its interests in an evolving regional landscape.

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