Why India abstained on IMF's $2.3 billion loan package for Pakistan

India abstained from voting on the IMF executive board's approval of two loan proposals worth $2.3 billion for Pakistan, officially recording its objections without casting a dissenting vote

During a meeting of the International Monetary Fund's (IMF’s) executive board on Friday, India expressed serious reservations over the financial aid package being extended to Pakistan.

 

India chose to abstain from voting on two separate IMF loan proposals totalling $2.3 billion for Pakistan, after raising concerns that the funds could potentially be diverted to support state-sponsored cross-border terrorism.

 

India pointed out that continuous lending has burdened Pakistan with substantial debt, effectively placing it in a position where the IMF may find it too risky to allow default — creating a problematic precedent of a “too big to fail” borrower.

 

 

Understanding India's abstention

 

The IMF executive board comprises 25 directors representing individual countries or coalitions. It oversees the organisation's routine operations, including the approval of financial aid packages.

 

Unlike the United Nations, IMF voting is based on the economic size and contribution of each member country. Larger economies like the United States have greater influence. Most decisions are reached through consensus; when a formal vote is necessary, directors can either support or abstain — there is no option to vote “no”.

 

India’s decision to abstain from the vote was not a sign of neutrality but a reflection of the limitations in the IMF’s voting structure. By choosing to abstain, India signalled its disapproval and officially recorded its objections.

 

News reports indicated that India's concerns centred on three key issues:

 

>Chronic dependence: India questioned the merit of continued IMF support, noting that Pakistan had received assistance in 28 of the past 35 years — including four programmes in the last five years — without demonstrating lasting reform.

 

>Military interference: India raised alarms about the entrenched role of the Pakistani military in economic decision-making, which it argued hampers transparency, civilian accountability, and structural reforms.

 

>Security concerns: India opposed funding a country it accuses of supporting cross-border terrorism, warning that such actions pose reputational risks to global institutions and weaken adherence to international standards.   

 

  In its statement, India said it “pointed out that rewarding continued sponsorship of cross-border terrorism sends a dangerous message to the global community, exposes funding agencies and donors to reputational risks, and makes a mockery of global values”. It added: “While the concern that fungible inflows from international financial institutions, like IMF, could be misused for military and state-sponsored cross-border terrorist purposes resonated with several member countries, the IMF response is circumscribed by procedural and technical formalities.”

 

India flags political influence in IMF’s lending to Pakistan

 

Referring to the Pakistan section of IMF report, titled “Evaluation of Prolonged Use of IMF Resources”, India’s representative on the executive board raised concerns over what it described as “a widespread perception that political considerations have an important role to play in the IMF lending to Pakistan”.

 

Debt risks and repeated bailouts

 

The Indian side highlighted that Pakistan had received repeated financial assistance, including four separate loan programmes since 2019. It argued that such frequent bailouts resulted in a significant debt burden for the country. “As a result of repeated bailouts, Pakistan’s debt burden is very high, which paradoxically makes it a ‘too big to fail’ debtor for the IMF,” the representative noted.

 

Pak military’s role in economic management

 

India also expressed concern over the Pakistan military’s deep and persistent involvement in economic matters, warning of the risks it poses to policy stability and reform continuity. “Even when a civilian government is in power now, the army continues to play an outsized role in domestic politics and extends its tentacles deep into the economy.   

 

  To support its argument, India cited a 2021 UN report describing military-linked businesses as the “largest conglomerate in Pakistan”. The situation has not changed for the better; rather the Pakistan Army now plays a leading role in the Special Investment Facilitation Council of Pakistan,” it said in its remarks to the IMF.

 

Questions over IMF programme’s effectiveness

 

Describing Pakistan as a "prolonged borrower", the Indian representative suggested that the need for yet another bailout indicated shortcomings either in the design, monitoring, or implementation of previous IMF programmes. “India pointed out that such a track record calls into question either the effectiveness of the IMF programme designs in case of Pakistan or their monitoring or their implementation by Pakistan,” according to a statement from the finance ministry.

 

Although India has usually abstained from voting on IMF loan approvals for Pakistan, it had, in 2023, advocated for the imposition of safeguards to ensure that such financial aid is not diverted towards defence expenditure or used to repay debts owed to other countries.