As Pakistan secures yet another multibillion-dollar rescue from the IMF while simultaneously realigning itself with Washington, India is warning the international community that such financial support indirectly creates fiscal space for networks Pakistan once vowed to dismantle.
The IMF has stepped in again to stabilise Pakistan’s deteriorating finances, but this intervention arrives at a moment of renewed American interest in Islamabad. With Field Marshal Asim Munir welcomed at the White House and the United States positioning itself as a mediator during the India–Pakistan standoff of May 2025, Pakistan has succeeded in reaffirming its strategic utility to Washington. The timing of the latest IMF disbursements has therefore prompted debate about whether this is a necessary economic lifeline or a politically motivated bailout shaped by geopolitical calculations.
Pakistan is among the IMF’s most frequent borrowers. Over several decades, it has entered into nearly 25 different arrangements, yet continues to cycle back into crisis with remarkable predictability. The current Extended Fund Facility—roughly seven billion dollars—was intended to stabilise the economy and buy time for reforms. Instead, by May 2025, with only partial funds released, Pakistan’s economic indicators were still in free fall, prompting fresh negotiations for additional support.
India’s concerns rest on a fundamental financial reality: money is interchangeable. Although IMF funds cannot legally be used for defence or to sustain extremist networks, covering Pakistan’s external financing shortfalls frees up domestic revenue that can be redirected elsewhere. India has repeatedly reminded the global community of Pakistan’s long-documented history with terror-financing infrastructures, citing FATF assessments that once categorised the country as systemically deficient.
Pakistan exited the FATF grey list in October 2022 following four years of scrutiny and a rigorous 34-point action plan that required legislative reform, asset freezes and targeted prosecutions. Even so, FATF officials have stressed that removal from the list does not confer permanent credibility. Any deterioration in enforcement or oversight could lead to renewed monitoring, and regional evaluations still point to weak spots within Pakistan’s financial control systems.
Following the Pahalgam terror attack, the IMF quietly tightened conditions in acknowledgment that rising geopolitical friction influences economic vulnerability. Yet Pakistan has continued to turn every crisis into an opportunity—offering Washington strategic cooperation, offering the IMF assurances of reform, and offering the world a narrative of temporary instability on the verge of repair.
The outcome is a familiar cycle: another bailout, another diplomatic reset, and yet another moment in which the international community chooses to overlook where Pakistan’s newly created fiscal breathing room may ultimately flow.
