IMF Loan To Pakistan: Can Pakistan Fight Against India On Borrowed Money?

IMF Loan To Pakistan: In a high-stakes development today, the International Monetary Fund (IMF) reviewed Pakistan’s ongoing $1 billion Extended Fund Facility (EFF) and also considered a new $1.3 billion Resilience and Sustainability Facility (RSF).

While these programs aim to stabilise Pakistan’s faltering economy, India, an active and responsible IMF member, raised pressing concerns regarding the efficacy and ethics of continued lending to Pakistan.

IMF Loan To Pakistan: History

India questioned the IMF’s rationale behind supporting a nation that has persistently failed to meet program conditions.

According to IMF data, Pakistan has made 25 loan deals with the IMF from 1958 to 2024, totalling $44.57 billion. 

Out of this amount, $28.2 billion has been given to Pakistan. Right now, Pakistan still owes the IMF $8.3 billion. These loans include different types, such as Stand-By Arrangements and Extended Fund Facilities.

Since 2019 alone, the country has entered four separate IMF programs. “Had the previous programs succeeded,” India noted, “Pakistan would not be back at the IMF’s door so soon.”

But India’s concerns go far beyond economic mismanagement. It pointed to a deeply troubling pattern: the potential misuse of fungible IMF loans by Pakistan for military aggression and state-sponsored terrorism. This isn’t just a hypothetical fear.

A 2021 UN report called the Pakistan military the largest conglomerate in the country — a force that now plays a decisive role even in civilian economic platforms like the Special Investment Facilitation Council.

India flagged findings from the IMF’s own Evaluation Report on Prolonged Use of Fund Resources, which highlighted perceptions of political bias in Pakistan’s favour. Such repeated and unconditional bailouts, India argued, have turned Pakistan into a “too-big-to-fail” debtor — a dangerous precedent for global financial governance.

Financial Reality Check

Kishore Subramanian, a noted financial expert, put it bluntly, “From the IMF, when Pakistan takes a loan, there are Financial Action Task Force (FATF) conditions. You can’t spend the money any which way you want. You can’t use it to fund terrorism or military adventures. So for this war, they can’t use that money — number one.”

He further contextualised the fragile state of Pakistan’s economy, “Their foreign exchange reserves were between $4 billion to $6 billion. Now, after this conditional loan and all, it's gone to $15 billion. Still, our [India’s] monthly GST collection is bigger than their entire forex reserves.”

India's Goods and Services Tax (GST) collection was all-time high of about Rs 2.37 lakh crore in April. The GST mop-up was Rs 2.10 lakh crore in April 2024 -- the second highest collection ever since GST was rolled out on July 1, 2017. On the other hand, Pakistan's forex reserve stands at nearly Rs 12,811.49 crore.

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Indeed, Pakistan’s economy teeters on the brink. A nation that once had a higher per capita income than India in 1999 now lags behind — at just 60% of India’s current per capita figure. And India’s GDP growth continues to outpace Pakistan’s by a wide margin.

“Pakistan is in the begging world,” Subramanian said, “It can’t even afford to fight a war. Long wars, for example, one month, two months, six months, can consume about 5% of India’s GDP. That’s a number Pakistan cannot sustain. It is bankrupt.”

Strategic Cost of Borrowed Conflict

There’s also the geopolitical cost. Subramanian warned that every rupee Pakistan borrows — be it from China or elsewhere — will come at a steep strategic price:

“Nobody gives you money for free. With every rupee that Pakistan borrows to fight a war, it is going to lose some part of its land, infrastructure, or future.”

The implications are stark. A nuclear-armed but financially broken state, Pakistan faces internal instability, inflation, external debt obligations, and donor fatigue. To attempt military adventurism under such circumstances would be suicidal, he said.