India-Pak tensions: World Bank chief Ajay Banga holds key talks with PM Modi amid Indus Waters Treaty suspension

World Bank Group President Ajay Banga met with Prime Minister Narendra Modi on Thursday, a significant development against the backdrop of escalating tensions between India and Pakistan following Operation Sindoor.

The meeting comes a day after India carried out targeted airstrikes on terror camps in Pakistan and Pakistan-Occupied Kashmir in response to the heinous Pahalgam terror attack last month. In retaliation, Pakistan attempted coordinated strikes on Indian military installations across 15 cities, which were thwarted. India responded swiftly by targeting Pakistani air defence systems.

Adding further weight to Thursday's meeting is India's recent move to suspend the Indus Waters Treaty, a landmark water-sharing agreement signed in 1960 between then Prime Minister Jawaharlal Nehru and Pakistan President Ayub Khan. The World Bank played a pivotal role in facilitating the nine-year-long negotiations that led to the treaty and remains a key signatory to the accord.

Following the suspension, India halted the release of water through the Baglihar dam on the Chenab river. Located in Jammu and Kashmir’s Ramban district, the run-of-the-river project generates 900 MW of hydroelectric power. Built under the provisions of the Indus Waters Treaty, the dam can only hold water up to a certain level before being required to release it.

India’s move to block the flow of water—even temporarily—is being seen as a strategic signal to Pakistan, underscoring the seriousness of its response amid mounting hostilities. However, experts note that any long-term stoppage would require structural changes to the dam—something that cannot be done overnight.

Ajay Banga’s visit, in this context, is viewed as a crucial engagement, given the World Bank’s historical and institutional involvement in the treaty and the region’s stability.

It was recently announced that India will be making a request to global multilateral agencies such as the International Monetary Fund (IMF) and the World Bank to reassess their financial assistance to Pakistan following the tragic terror attack in J&K's Pahalgam that resulted in the loss of 26 innocent lives. This diplomatic initiative precedes an important IMF executive board meeting scheduled for May 9, during which Pakistani officials will be discussing the first review of their Extended Fund Facility and a request for the Resilience and Sustainability Facility. 

The board will also be considering a new $1.3 billion climate resilience loan and continuing the assessment of a $7 billion bailout package. In addition to the IMF, India is expected to express its concerns with the Asian Development Bank (ADB) and the World Bank.

By the end of 2024, ADB had allocated $43.4 billion to Pakistan across 764 loans, grants, and technical assistance projects. Presently, the sovereign portfolio consists of 53 loans and three grants totaling $9.13 billion. Notably, a $320 million loan was approved for rural road development in Khyber Pakhtunkhwa. Additionally, in January 2025, the World Bank authorised a $20 billion aid package for Pakistan to address the country's growing economic difficulties.

(With agency inputs)