The International Monetary Fund (IMF) is set to review Pakistan’s request for a $1.3 billion loan under the Resilience and Sustainability Facility (RSF) on May 9, 2025. This loan is meant to help Pakistan tackle climate change and support its economic recovery. However India has raised concerns and is reportedly opposing this financial aid. India’s executive director at the IMF loan Parameswaran Iyer is expected to present the countrys stance during the board meeting. This opposition could make things harder for Pakistan which is already struggling with a weak economy.
Why Is India Opposing the Loan?
India’s opposition to the $1.3 billion loan comes at a time of heightened tensions with Pakistan. The main trigger is a recent terror attack in Pahalgam a popular tourist spot in Jammu and Kashmir on April 22, 2025. The attack killed 26 civilians mostly tourists and Indian authorities have blamed Pakistan for supporting the terrorists involved. India believes that Pakistan has been involved in cross border terrorism for years and this incident has fueled anger across the country. Indian leaders including Defense Minister Rajnath Singh have called Pakistan a “rogue state” that promotes global terrorism.
Because of these concerns India argues that giving Pakistan such a large loan could be risky. The Indian government worries that the funds might be misused or not used for the intended purpose like addressing climate change. Instead India believes the money could indirectly support activities that harm regional stability. India has also pointed out Pakistan’s history of economic mismanagement and its failure to implement meaningful reforms which raises doubts about whether the loan will be used effectively.
Pakistan’s Economic Struggles
Pakistan’s economy is in a tough spot. With a gross domestic product (GDP) of about $350 billion the country faces high inflation low foreign exchange reserves and a heavy debt burden. Pakistan owes almost $90 billion to various lenders over the next three years and it relies heavily on loans from the IMF World Bank and Asian Development Bank (ADB). Since 1958 Pakistan has taken more than 20 IMF loans making it one of the IMF’s biggest debtors.
In July 2024 Pakistan secured a $7 billion bailout package from the IMF under the Extended Fund Facility (EFF). This program is designed to help Pakistan stabilize its economy through reforms like increasing taxes improving energy sector efficiency and reducing government spending. The $1.3 billion RSF loan is separate and focuses on climate resilience as Pakistan is highly vulnerable to natural disasters like floods. In 2022 massive floods affected over 33 million people and caused economic losses of more than $30 billion.
The IMF has praised Pakistan for recent progress noting that inflation has dropped to its lowest level since 2015 and financial conditions have improved. However the country still faces risks like geopolitical tensions global economic challenges and the threat of climate related disasters. The $1.3 billion loan along with an additional $1 billion from the EFF is critical for Pakistan to keep its economy afloat.
India’s Strategy and Diplomatic Moves
India’s opposition to the loan is not just about the money it’s part of a broader diplomatic strategy to pressure Pakistan. India has already taken steps to signal its displeasure such as suspending the Indus Waters Treaty which governs how the two countries share river waters. India is also urging other global financial institutions like the World Bank and ADB to review their funding to Pakistan. As of December 2024 the ADB had committed $43.4 billion to Pakistan while the World Bank approved a $20 billion package in January 2025.
India’s executive director at the IMF will likely highlight Pakistan’s alleged links to terrorism and question the country’s ability to use the loan responsibly. In the past India abstained from voting on Pakistan’s $7 billion bailout package in 2024 but this time it may actively vote against the new loan. This shift shows India’s growing frustration with Pakistan especially after the Pahalgam attack.
What Could Happen Next?
If India’s opposition leads to the IMF delaying or rejecting the $1.3 billion loan Pakistan could face serious financial challenges. The country needs these funds to pay its debts invest in climate adaptation and continue economic reforms. Without the loan Pakistan’s economy might slip back into crisis leading to higher inflation, unemployment and social unrest.
However the IMF board includes representatives from many countries and India’s vote alone may not be enough to block the loan. Other nations like the United States and China have significant influence at the IMF. Pakistan has also been working to gain support from its allies holding over 70 meetings with financial institutions during recent IMF spring meetings in Washington.
For India opposing the loan is a way to hold Pakistan accountable for its actions but it also risks escalating tensions further. The United Nations Security Council has already urged both countries to avoid military conflict and reduce hostilities especially after recent ceasefire violations along the Line of Control.
The Bigger Picture
The India-Pakistan rivalry has deep historical roots and incidents like the Pahalgam attack only make things worse. Both countries are nuclear armed neighbors and their disputes over Kashmir have led to wars and ongoing conflicts. India’s opposition to the IMF loan is not just about economics—it’s a way to send a message to Pakistan and the international community about the consequences of supporting terrorism.
At the same time Pakistan argues that India is politicizing the IMF’s aid process. Pakistani officials have called India’s objections “politically motivated” and insist that the loan is essential for their country’s survival. They point out that the IMF has already approved the staff level agreement for the loan which shows confidence in Pakistan’s economic reforms.
Conclusion
The IMF board meeting on May 9, 2025 will be a critical moment for both Pakistan and India. If the loan is approved Pakistan will get much needed funds to support its economy and fight climate change. But if India’s opposition gains traction Pakistan could face a financial setback and tensions between the two countries might worsen. This situation highlights the complex mix of economics politics and security in South Asia. As the world watches the outcome of this meeting could shape the future of India Pakistan relations and Pakistan’s economic recovery.