IMF Approves $2.3 Billion in Loans for Pakistan Amid India’s Objections

The International Monetary Fund (IMF) has approved a $1 billion disbursement under Pakistan’s ongoing $7 billion Extended Fund Facility (EFF) and a new $1.3 billion loan under the Resilience and Sustainability Facility (RSF), despite strong objections from India.

The decision, made on May 9, 2025, brings total disbursements under the EFF to $2 billion, aimed at stabilizing Pakistan’s struggling economy amidst escalating tensions with India.

The approval comes as Pakistan faces economic strain from military escalation following the Pahalgam terror attack and India’s Operation Sindoor.

India’s Position

India abstained from the IMF vote, raising concerns over Pakistan’s poor track record with 25 IMF bailouts since 1958 and the potential misuse of funds for state-sponsored terrorism. “Rewarding continued sponsorship of cross-border terrorism sends a dangerous message,” India’s Finance Ministry stated, citing Pakistan’s military interference in economic affairs and a 2021 UN report describing military-linked businesses as the country’s largest conglomerate.

However, India warned that Pakistan’s history of 28 years of IMF disbursements since 1989 questions the effectiveness of these programs.

Pakistan’s Reaction

Pakistan’s Prime Minister Shehbaz Sharif hailed the approval as a “defeat of India’s high-handed tactics,” claiming it reflects global confidence in Pakistan’s economic recovery. The loans, part of a 37-month EFF program, are tied to reforms like tax restructuring and energy sector adjustments.

With external debt exceeding $130 billion, the funds provide critical relief, though critics argue they may not address underlying issues like corruption and reliance on foreign aid.