India had earlier raised concerns regarding the effectiveness of IMF programs in Pakistan, citing its historically poor implementation track record and voicing apprehensions about the potential misuse of international debt financing for state-sponsored cross-border terrorism.
On Friday, May 9, 2025, the International Monetary Fund (IMF) approved the immediate disbursement of approximately $1 billion to Pakistan under the ongoing Extended Fund Facility (EFF).
In an official statement, the Washington-based global lender announced that its Executive Board had concluded the initial review of Pakistan’s economic reform programme under the EFF arrangement.
“This decision allows for an immediate disbursement of around USD 1 billion (SDR 760 million), bringing total disbursements under the arrangement to about USD 2.1 billion (SDR 1.52 billion),” the IMF stated.
Additionally, the IMF Executive Board approved Pakistan’s request for an arrangement under the Resilience and Sustainability Facility (RSF), granting access to approximately $1.4 billion (SDR 1 billion).
The IMF noted that Pakistan’s 37-month EFF programme, initially approved on September 25, 2024, aims to bolster resilience and support sustainable growth, with key focus areas including strengthening macroeconomic sustainability.
The RSF facility, the IMF added, will aid Pakistan in reducing its vulnerability to natural disasters and help build both economic and climate resilience.
Following the Executive Board’s deliberations, IMF Deputy Managing Director and Chair Nigel Clarke commented that risks to the economic outlook remain elevated, particularly due to global economic policy uncertainty, rising geopolitical tensions, and persistent domestic vulnerabilities.
India, prior to this approval, had raised objections concerning the IMF’s continued financial support to Pakistan. New Delhi cited concerns over Pakistan’s lack of credibility in implementing reforms and the possibility that international funds could be diverted towards state-sponsored cross-border terrorism.
India also opposed the IMF’s proposal to extend an additional $2.3 billion in loans to Pakistan, arguing that the funds might be misused to support terrorist activities beyond its borders.
At the IMF Executive Board meeting held on Friday to review Pakistan’s EFF programme, India formally registered its protest and abstained from the vote.
India’s objection comes in the backdrop of heightened military tensions between the two countries following a terrorist attack in Pahalgam, Kashmir, on April 22, which claimed the lives of 26 people, most of whom were tourists.
India emphasized that continued financial support to a country allegedly involved in sponsoring terrorism sends a dangerous signal to the international community, exposes financial institutions and donors to reputational risk, and undermines global values. This position was outlined in a statement released by the Ministry of Finance.
“While the concern that fungible inflows from international financial institutions, like the IMF, could be misused for military and state-sponsored cross-border terrorist purposes resonated with several member countries, the IMF’s response is circumscribed by procedural and technical formalities. This is a serious gap highlighting the urgent need to ensure that moral values are given appropriate consideration in the procedures followed by global financial institutions,” the statement read.
The Finance Ministry further asserted that the Pakistan military’s deeply entrenched role in economic matters poses substantial risks, including potential policy reversals and failures in reform implementation.
“The situation has not improved; rather, the Pakistan army now plays a leading role in the Special Investment Facilitation Council of Pakistan,” the ministry added.
Meanwhile, a statement released by Pakistan’s Prime Minister’s Office expressed satisfaction over the IMF’s decision to release the $1 billion instalment, and described India’s objections as unsuccessful.
Prime Minister Shehbaz Sharif welcomed the development, saying, “India’s high-handed tactics against Pakistan have failed.”
The PMO’s statement also declared that Pakistan’s economic situation is showing signs of improvement and that the country is on a path to development. It accused India of attempting to derail Pakistan’s progress through acts of unilateral aggression.
“Indian attempts to sabotage the IMF programme have failed,” the statement read, adding that the IMF’s support will help stabilise Pakistan’s economy and pave the way for long-term recovery.
The statement further emphasised that the government is focusing on priority reform areas such as tax policy, energy sector efficiency, and private sector growth. It added that improvements in key economic indicators over the past 14 months reflect the success of the government’s positive policies.
With the latest approval, the IMF’s Executive Board has authorised an immediate disbursement of USD 1 billion, raising total disbursements under the loan programme to approximately USD 2 billion.
Pakistan and the IMF had agreed to a three-year, $7 billion assistance programme in July of last year. The new arrangement is designed to support the country’s efforts to restore macroeconomic stability and lay the foundation for stronger, more inclusive, and more resilient economic growth.
A staff-level agreement between Pakistan and the IMF was reached on March 25, 2025, during the first biannual review of the 39-month, $7 billion programme. The agreement included commitments to a series of reforms such as the implementation of a carbon levy, timely adjustments to electricity tariffs, increased pricing for water resources, and liberalisation of the automobile sector.
