The escalating conflict between India and Pakistan, especially following Pakistan's attacks on Indian military and civilian sites, is unfolding at a moment of extreme financial vulnerability for Islamabad. With a crucial International Monetary Fund (IMF) board review scheduled on May 9, Pakistan's aggressive actions may severely backfire, potentially derailing its $7 billion bailout program.
India has formally stated its opposition to IMF assistance to Pakistan, citing the country's support for terrorism and its recent escalation of hostilities, including the April 22 terror attack in Pahalgam that killed 26 civilians. Foreign Secretary Vikram Misri made it clear that India's representative on the IMF board would press this position during the meeting.
Pakistan’s financial situation is already dire:
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$130 billion in external debt (as of 2024)
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$6.2 billion in IMF loans outstanding as of March 31, 2025
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Reliance on bailouts from China, Saudi Arabia, Qatar, IMF, and the World Bank
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A history of 25 IMF loan requests since 1950
What complicates matters further is that General Asim Munir, the powerful army chief, holds sway over Pakistan’s civilian government and economy, running military-owned commercial enterprises and having played a role in installing the current PM, Shehbaz Sharif.
The Indus Waters Treaty — a key World Bank-brokered agreement on water sharing — has now been put in abeyance by India following the Pahalgam attacks, signalling a broader diplomatic isolation of Pakistan.
The World Bank president, Sanjay Banga, met with PM Modi and Finance Minister Sitharaman on May 8 and confirmed that the Bank would not interfere in the treaty, further weakening Pakistan’s geopolitical support.
Meanwhile, Pakistan’s domestic situation continues to deteriorate:
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Skyrocketing inflation
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Massive youth brain drain
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Unemployment and stagnant growth
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Record defence spending fueled by its anti-India posture
India has insisted that its military action — Operation Sindoor — was limited to precision strikes on terror camps in Pakistan and POK, avoiding civilian casualties. In contrast, Pakistan’s retaliation has included drone and missile attacks on Indian civilian areas, with 18 Indian deaths and over 50 injuries in 15 days of shelling along the LoC and border regions.
By escalating tensions just before the IMF review, Pakistan may have undermined its own case for international financial support, presenting itself as a risky borrower with unpredictable military tendencies. Even if it secures the upcoming $2 billion tranche, future funding may be jeopardized due to eroding global confidence.
