IMF approves $1.3 billion Pakistan payment over India’s objection

The International Monetary Fund’s (IMF) executive board on May 9 approved roughly US$1 billion (S$1.3 billion) in loan disbursements to Pakistan, bringing some relief for the nation’s fragile finances amid its worsening conflict with neighbouring India.

While a board vote on such a payment is typically a formality – essentially ratifying a deal hammered out in March between IMF staff and the government – the recent escalation in hostilities between the nuclear-armed neighbours put the decision in focus. 

The Washington-based lender said in a statement that the board approved the release of about US$1 billion from a broader US$7 billion programme agreed in 2024. It also approved a separate US$1.4 billion loan to support climate resilience, but has not started releasing those funds. 

Indian officials this week said their representative to the board would oppose the loan, a rare public comment on deliberations at the top of the fund that are usually private. But the push was expected to have little chance of success, given India’s limited voting share on the board, as well as Pakistan’s record of meeting the loan terms.

“The case regarding Pakistan should be self-evident to those who generously open their pockets to bail out this country,” Indian Foreign Secretary Vikram Misri said on May 8, criticising the country for needing repeated IMF programmes. The Indian government said in a statement earlier on May 9 that it abstained from voting. 

The funds would boost Pakistan’s foreign exchange reserves and buffer the economy, which faces headwinds from US President Donald Trump’s sweeping tariffs and deteriorating ties with India.

Hostilities between the two nations have escalated since

an attack in Kashmir in April

that killed 26 civilians in the Indian-controlled part of the territory. India had raised concerns with the multilateral lender over the loans being given to Pakistan.

The IMF loans have brought their own political pressure on Pakistani Prime Minister Shehbaz Sharif’s government, which has increased taxes, raised energy prices and slashed subsidies to gain approval for the funds. His government is expected to present the annual budget in Parliament by the end of May. 

Pakistan averted a default in 2023, but it still faces an overhang of large interest payments. In 2024, the IMF estimated that the nation will need more than US$100 billion in external financing until 2029. Pakistan’s foreign exchange stockpile of over US$10 billion is enough for less than three months of imports. BLOOMBERG