India abstains from IMF vote on Pakistan bailout, flags terror risk in use of funds

India abstained from voting on the IMF’s review of Pakistan’s lending programs, citing serious concerns over the misuse of debt financing for state-sponsored cross-border terrorism.

As the International Monetary Fund (IMF) considered extending both the Extended Fund Facility (EFF) and a new Resilience and Sustainability Facility (RSF) to Pakistan, India raised alarm over Pakistan’s long history of failing to implement past IMF programs effectively. India warned that continued financial support to a nation with a poor track record risks enabling further military interference and potentially funding terrorist activities. 

India questioned whether past IMF programs have been effective, pointing out that Pakistan has borrowed from the IMF for 28 of the past 35 years but still faces recurring financial crises.

With four IMF programs in just the last five years, India highlighted the failure of previous bailouts to establish a sustainable economic environment for Pakistan. "Had the previous programs succeeded in putting in place a sound macroeconomic policy environment, Pakistan would not have approached the Fund for yet another bailout program," India stated.

The ongoing role of the Pakistani military in both domestic politics and economic affairs was flagged as a critical concern. Despite a civilian government, the military continues to exert disproportionate influence, with military-linked businesses being the "largest conglomerate in Pakistan," as described by a 2021 UN report.

India's concern that the military's interference could lead to policy reversals or reforms being undermined was echoed in the IMF’s own evaluation report. The IMF acknowledged the issue but emphasised procedural and technical formalities in its response.

Meanwhile, pointing out continued support from the IMF, India raised a more alarming point that such lending to Pakistan could inadvertently reward the country’s ongoing support for cross-border terrorism. The sponsorship of such activities undermines global values and exposes international institutions to reputational risks. India strongly argued that funding agencies must take into account the moral implications of supporting countries with such a record.