India to push multilateral lenders for funding review for Pakistan after Pahalgaon attack: Govt sources

In the wake of the Pahalgaon terror attack, the Indian government is preparing to formally engage with multilateral financial institutions to review and potentially curtail aid to Pakistan. A senior government official told Business Today that India will soon open dialogue with key lenders, including the International Monetary Fund (IMF), World Bank, and Asian Development Bank (ADB), calling for a reassessment of financial assistance being extended to Islamabad.

"India will raise concerns over continued development funding to Pakistan despite its failure to rein in cross-border terrorism," the official said, pointing to the strategic shift in India’s diplomatic efforts following the recent incident.

Pakistan is currently under a $7 billion IMF bailout program, with reforms contingent on improving domestic revenues and reducing fiscal deficits. In September 2024, Pakistan received approval for a US$7 billion loan from the IMF, marking the 24th bailout programme extended to the country since 1958.

However, India is expected to question the credibility and oversight of such programs in light of repeated terror-related incidents.

As per news reports, the Asian Development Bank has extended $43.4 billion to Pakistan through 764 public sector loans and grants.

The World Bank has committed $49.7 billion across 365 projects, including a massive $20 billion deal in January 2025.

The IMF has continued its active involvement with Pakistan by implementing several stabilisation programs, including the current $7 billion arrangement. This program is crucial for the $350 billion economy, and Pakistan has reported successful stabilisation as a result of the bailout, preventing a default scenario.

The Indian government has implemented a series of retaliatory actions, such as suspending the essential Indus Waters Treaty and closing its airspace to Pakistani flights. Additionally, India has requested the IMF to reassess the terms and distribution of its financial assistance to Pakistan.

The ongoing conflict in Kashmir continues to be a source of tension between the two nuclear-armed nations, as they both claim the region in its entirety but govern different sections. India has accused Pakistan of involvement in cross-border terrorism, while Pakistan maintains that it simply offers moral and diplomatic support to Kashmiri aspirations for self-determination.