IMF funds flow to Pakistan, relief flows to Masood Azhar: India questions fund oversight

Defence Minister Rajnath Singh on Friday publicly urged the International Monetary Fund (IMF) to reconsider its $2.1 billion bailout to cash-strapped Pakistan, accusing Islamabad of state-sponsored terrorism.

“The IMF's aid to Pakistan is a form of indirect funding to terror,” Singh said, addressing Indian Air Force personnel in Gujarat. His sharp warning came as Indian forces continued Operation Sindoor, targeting terror infrastructure in Pakistan and PoK, even as Pakistan launched missile and drone attacks on Indian territory.

Singh cited reports that Pakistan’s government approved ₹14 crore in funds to Masood Azhar, founder of the UN-designated terror outfit Jaish-e-Mohammed.

Can Pakistan divert IMF money for terror?

Direct terror funding from IMF loans is highly unlikely. However, experts warn of indirect pathways that could enable misuse:

Budget fungibility: IMF funds stabilize Pakistan’s foreign reserves and budget deficits. This frees up domestic resources for military and intelligence agencies, which operate with minimal oversight.

Weak provincial controls: Subsidies and social programs in sectors like agriculture and energy can be manipulated via front companies linked to militant groups.

Informal networks: Pakistan’s large undocumented economy (35% of GDP) and hawala channels allow untraceable fund transfers, bypassing formal checks.

IMF’s safeguards: Are they enough?

The IMF employs several layers of safeguards:

GELRIC framework for central bank audits and controls.

Anti-Money Laundering/Counter-Terrorism Financing (AML/CFT) compliance via FATF.

Loan tranches tied to economic reforms (e.g., subsidy cuts, tax measures).

But critics argue these mechanisms prioritize macroeconomic stability over detailed transactional oversight. Once IMF funds bolster Pakistan’s economy, Islamabad has greater fiscal leeway to channel domestic funds into defense spending — or worse.

An IMF report from 2024 flagged Pakistan’s “limited progress” on AML/CFT goals, raising further red flags.

Pakistan’s military consumes 16% of the federal budget, dwarfing education and healthcare. With Pakistan launching missile attacks mere hours after an IMF disbursement in May 2025, India’s concerns about indirect terror financing have intensified.

Islamabad denies these charges, while Indian officials argue the IMF is turning a blind eye. “Any financial assistance to Pakistan is actually terror funding,” Singh reiterated.