IMF defends bailout package to Pakistan | The International Monetary Fund (IMF) has defended its decision to release $1 billion in bailout funds to Pakistan, asserting that the cash-strapped nation had “met all required targets” under the Extended Fund Facility (EFF) program. The disbursal came even as Pakistan engaged in cross-border firing with India, following India’s high-profile Operation Sindoor — a targeted military offensive against terror infrastructure in Pakistan and Pakistan-occupied Kashmir (PoK).
The IMF’s justification has reignited a diplomatic row, with India calling on the global lender to reconsider its financial assistance to Pakistan, citing the country’s history of sponsoring cross-border terrorism.
IMF Releases $2.1 Billion Despite Conflict Tensions
The $1 billion release was the second tranche of a $2.1 billion disbursement under the IMF’s $7 billion Extended Fund Facility agreement with Pakistan, signed last year. According to Julie Kozack, Director of the IMF’s Communications Department, the funding followed a staff-level agreement in March, and a subsequent Executive Board approval on May 9, 2025.
“Our Board found that Pakistan had indeed met all of the targets. It had made progress on some of the reforms… and the Board went ahead and approved the program,” Kozack said at a press briefing.
She further clarified that while the IMF was aware of the regional tension, the financial decision was made strictly on economic benchmarks, not geopolitical developments.
India Slams IMF for “Indirect Funding of Terror”
India reacted strongly to the IMF’s continued financial support to Pakistan. Defence Minister Rajnath Singh last week called the bailout “a form of indirect funding to terror,” accusing Pakistan of using international funds to support state-sponsored terrorist networks.
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India launched Operation Sindoor earlier this month to dismantle militant infrastructure across the LoC after a series of fatal attacks on Indian soldiers and civilians. In the days following the operation, Pakistan reportedly intensified unprovoked shelling, heightening regional instability.
IMF Expresses Sympathy But Maintains Position
Addressing the ongoing India-Pakistan conflict, Kozack offered condolences over the loss of life but refrained from taking a position on the political dispute.
“We express our regrets and sympathies for the human toll from the recent conflict. We do hope for a peaceful resolution between the two countries,” she said.
While defending the disbursement, the IMF also laid down 11 new reform conditions for the next tranche of funding, reflecting concerns over Pakistan’s fragile fiscal outlook and growing tensions with India. These conditions include:
Parliamentary approval of a Rs 17.6 trillion budget
- Hike in electricity debt servicing surcharge
- Lifting ban on used car imports (over three years old)
- Permanent legislation on captive power levy ordinance
- Phasing out Special Technology Zones incentives by 2035
- A long-term financial sector strategy beyond 2027
The IMF reportedly warned that escalating conflict with India could pose severe risks to Pakistan’s reform and fiscal stability goals.
Regional Fallout and Global Scrutiny
The IMF’s financial aid has triggered concerns beyond India, with strategic analysts warning that funds given to unstable regimes can undermine global counterterrorism efforts. Meanwhile, Pakistan continues to struggle with high inflation, dwindling foreign reserves, and external debt, prompting its reliance on global lenders for survival.
India has also signaled that it may raise the issue at global diplomatic forums, urging international bodies to tie financial aid with counter-terror performance metrics.
