IMF Loan to Pakistan: India’s Objections and Regional Tensions Explained

Yes, the International Monetary Fund (IMF) has approved a $1 billion loan disbursement to Pakistan. This approval came as part of the first review of Pakistan’s ongoing $7 billion Extended Fund Facility (EFF) program. The decision was announced by the Pakistani government and confirmed by multiple sources on May 9, 2025.

The IMF executive board’s approval unlocks $1 billion in cash for Pakistan, bringing the total disbursed under the program so far to $2 billion. This comes despite strong objections from India, which raised concerns about the potential misuse of funds and Pakistan’s track record with IMF reforms. The IMF has not yet issued a public statement, but the Pakistani Prime Minister’s Office has officially welcomed the decision, describing it as a key step for the country’s financial stability.

Latest IMF Loan Approvals (May 2025)

• $2.3 Billion in New Funding:
  On May 9, 2025, the IMF Executive Board approved a combined $2.3 billion in new funding for Pakistan. This consists of:
  • $1 billion as the second tranche under the $7 billion Extended Fund Facility (EFF).
  • $1.3 billion under the Resilience and Sustainability Facility (RSF), aimed at strengthening Pakistan’s climate resilience. These RSF funds will be released gradually over the next 28 months.
• Total Disbursements:
  With this approval, Pakistan has received $2 billion from the current $7 billion EFF program.
• Purpose of the Loans:
  The EFF is designed to stabilize Pakistan’s economy, rebuild foreign reserves, reduce inflation, and unlock private-sector-led growth. The RSF focuses on climate adaptation and sustainability.

Pakistan’s Economic Context

• Recurring Financial Crises:
  Pakistan’s economy has faced persistent challenges, including low foreign exchange reserves, high external debt, and fiscal imbalances. As of early May 2025, the State Bank of Pakistan’s reserves stood at $10.33 billion, with total liquid reserves at $15.48 billion.
• IMF as a Lifeline:
  The IMF remains a crucial source of external financing for Pakistan, especially as the country faces debt repayments and seeks to avoid default.

India’s Objections and Regional Tensions

• India’s Abstention:
  India abstained from the IMF Executive Board vote on both the $1 billion EFF tranche and the $1.3 billion RSF, citing serious concerns over Pakistan’s historical misuse of IMF funds and the risk of financing state-sponsored terrorism.
• Concerns Raised:
  • India highlighted that Pakistan has received IMF disbursements in 28 of the past 35 years, with four separate programs since 2019.
  • India questioned the effectiveness of repeated IMF bailouts, pointing to Pakistan’s poor track record in implementing reforms and the military’s deep involvement in economic affairs.
  • The possibility of IMF funds being diverted to military or terrorist activities was a central theme in India’s objections.

IMF’s Position and Pakistan’s Response

• IMF’s Assessment:
  The IMF approved the latest loans after reviewing Pakistan’s fiscal performance and progress on structural reforms. The Fund’s program aims to address macroeconomic vulnerabilities and promote sustainable growth.
• Pakistan’s Reaction:
  The Pakistani government, led by Prime Minister Shehbaz Sharif, welcomed the IMF’s decision, emphasizing the country’s commitment to economic reforms and development.

Historical Perspective: Pakistan’s Long IMF Relationship

• Frequent Borrower:
  Since 1958, Pakistan has entered into 25 loan arrangements with the IMF, with a cumulative agreed amount of $44.57 billion and $28.2 billion actually disbursed.
  • The most recent EFF, agreed in September 2024, is set to run until October 2027, with a total value of $7.19 billion.
  • As of May 2025, Pakistan is the IMF’s fifth-largest debtor, owing $8.3 billion to the Fund.

Key Figures (Cross-Verified)

Summary Table: Key IMF Loan Figures for Pakistan (2024–2025)

Key Takeaways

• The IMF continues to be a critical financial backer for Pakistan, approving significant new funding in May 2025 to address economic instability and promote reforms.
• India remains a vocal critic, abstaining from the latest IMF votes and warning of the risk of funds being misused for terrorism and military purposes.
• Pakistan’s repeated reliance on IMF bailouts highlights deep-seated structural challenges and a pattern of incomplete reforms.
• The latest IMF package includes both immediate economic support and long-term sustainability funding, reflecting the dual challenges of fiscal stabilization and climate adaptation

Sources

• International Monetary Fund. (2025). Press Release: IMF Executive Board Approves $2.3 Billion in Funding for Pakistan, May 9, 2025. Retrieved from https://www.imf.org/en/News.
• State Bank of Pakistan. (2025). Weekly Statement of Position of Liquid Foreign Reserves, May 2025. Retrieved from https://www.sbp.org.pk/ecodata/index2.asp.
• Ministry of External Affairs, Government of India. (2025). Statement on India’s Abstention from IMF Vote on Pakistan Funding, May 2025. Retrieved from https://www.mea.gov.in.
• Dawn. (2025). PM Shehbaz Sharif Welcomes IMF Loan Approval, May 10, 2025. Retrieved from https://www.dawn.com.
• Reuters. (2025). India Raises Concerns Over Pakistan’s IMF Funding, May 9, 2025. Retrieved from https://www.reuters.com.
• International Monetary Fund. (2025). Historical Lending Arrangements with Pakistan. Retrieved from https://www.imf.org/en/Data.