In May 2025, the International Monetary Fund (IMF) approved a $2.4 billion loan package for Pakistan, comprising a $1 billion tranche under the Extended Fund Facility (EFF) and a $1.4 billion loan under the Resilience and Sustainability Facility (RSF). This decision, made amidst heightened India-Pakistan tensions following the Pahalgam terror attack and India’s Operation Sindoor, sparked controversy when India, a member of the IMF’s Executive Board, chose to abstain rather than vote against the loan.
Indian Defence Minister Rajnath Singh publicly urged the IMF to reconsider, citing Pakistan’s alleged use of funds for “funding terror infrastructure.” Critics argue that India squandered a chance to block the loan by not casting a dissenting vote, while others contend that abstention was the only viable option under IMF rules.
The IMF’s voting system is a critical starting point for understanding India’s decision. Unlike the United Nations’ one-country-one-vote model, the IMF’s 25-member Executive Board allocates voting power based on economic size and financial contributions, with the United States holding a dominant 16.49% share and India a modest 2.75%.
IMF rules do not permit a formal “no” vote; directors can only vote in favor or abstain, with decisions typically reached by consensus. India, representing a four-country group including Bangladesh, Sri Lanka, and Bhutan, abstained on May 9, 2025, citing Pakistan’s “poor track record” and concerns over funds fueling state-sponsored terrorism.
This abstention formally recorded India’s disapproval, but critics, including opposition leader Jairam Ramesh, argued that a stronger stance—implicitly a “no” vote—would have sent a “powerful signal.” However, the absence of a “no” vote option renders such criticism misleading, as abstention was the only mechanism to express dissent without endorsing the loan.
Historical context underscores why India’s concerns carried weight but lacked decisive impact. Pakistan has received 28 IMF bailouts since 1950, more than any other nation, with four programs since 2019 alone, including a $6 billion loan approved months after the 2019 Pulwama attack linked to Pakistan-based Jaish-e-Mohammed.
India’s representative at the time similarly raised objections, yet the loan proceeded, highlighting the IMF’s prioritization of macroeconomic stability over geopolitical or moral concerns. In 2025, India pointed to Pakistan’s “chronic dependence” on IMF funds, noting that 35% of its export earnings in 2025 will service debt, and its military, consuming 16% of the federal budget, operates with minimal oversight.
A 2024 IMF report flagged Pakistan’s “limited progress” on anti-money laundering and counter-terrorism financing (AML/CFT) goals, and reports of ₹14 crore allocated to Jaish-e-Mohammed’s Masood Azhar fueled India’s accusations of indirect terror financing. Despite these red flags, the IMF’s procedural framework limits its ability to act on such concerns, as loan approvals hinge on fiscal metrics like Pakistan’s $5.5 billion quota and repayment needs, not political considerations.
Could India have done more to block the loan? The argument for a more aggressive stance rests on India’s growing economic clout and moral authority. As the world’s fifth-largest economy, India’s 2.75% voting share, while small, carries symbolic weight, especially as it advocates for IMF voting reforms alongside figures like N.K. Singh, who co-authored a report with Lawrence Summers criticizing the Fund’s bias toward Western economies.
India could have rallied like-minded nations—potentially Japan or Australia, wary of regional instability—to amplify its abstention into a broader coalition, pressuring the IMF to impose stricter conditions, such as enhanced AML/CFT oversight or military spending caps. The U.S., with its 16.49% share and influence over IMF decisions, has historically linked aid to strategic goals, as seen in the reported conditioning of Pakistan’s 2025 loan on ceasefire compliance. India’s failure to engage Washington more assertively, perhaps through backchannel diplomacy, represents a missed opportunity to shift the consensus against Pakistan.
Yet, the counterargument—that abstention was strategic—holds merit given the IMF’s structural realities and India’s broader diplomatic goals. A lone abstention, while symbolic, risked isolating India without altering the outcome, as major powers like the U.S., EU, and China supported the loan. Pakistan’s status as a “too big to fail” debtor, with $8.3 billion owed to the IMF by year-end 2025, makes loan approvals almost inevitable to prevent global financial ripples.
India’s abstention avoided antagonizing allies like the U.S., crucial for its Quad and G20 partnerships, while still registering dissent. Historically, India has used abstention effectively, as in 2013 when it abstained on Sri Lanka’s IMF loan to protest human rights abuses, signaling disapproval without burning bridges. In 2025, India’s statement at the IMF board, highlighting Pakistan’s military-economic nexus and citing UN reports on its terror links, ensured its concerns were documented, potentially laying groundwork for future scrutiny.
The geopolitical backdrop amplifies the stakes. The Pahalgam attack, killing 26 tourists, and Pakistan’s retaliatory drone and missile strikes during Operation Sindoor, intensified India’s resolve to curb Pakistan’s financial leeway. Indian officials, including Rajnath Singh, argued that IMF funds free up Pakistan’s domestic budget for military spending, indirectly enabling actions like the reported $350 million in drone supplies from Turkey.
Yet, the IMF’s apolitical mandate and Pakistan’s strategic importance to China and the U.S. limit India’s leverage. China’s backing of Pakistan within the IMF, as part of its Belt and Road strategy, and the U.S.’s interest in stabilizing Pakistan to counter regional extremism, outweighed India’s objections. A more confrontational approach, such as mobilizing public opinion or threatening reciprocal economic measures, could have backfired, portraying India as obstructing global financial stability.
What could India have done differently? Beyond abstention, India might have pushed for conditionalities tied to the loan, such as mandatory audits of Pakistan’s military budget or progress on FATF grey-list removal. India’s intelligence on Pakistan’s terror financing, shared discreetly with IMF board members, could have strengthened its case.
Diplomatically, engaging smaller IMF members like Bangladesh or Sri Lanka, part of India’s voting group, to echo its concerns might have amplified its voice. Long-term, India’s advocacy for IMF voting reform—shifting from market-based GDP to purchasing power parity—could enhance its influence, addressing the systemic bias that dilutes emerging economies’ power.
Ultimately, India’s abstention was a calculated move within the IMF’s rigid framework, balancing dissent with diplomacy. It avoided futile confrontation but fell short of harnessing India’s rising global stature to challenge Pakistan’s bailout cycle. The episode underscores the need for India to combine moral arguments with strategic coalition-building, leveraging its economic weight to reform institutions like the IMF.
As Pakistan’s debt grows and regional tensions persist, India must move beyond symbolic gestures to ensure that international aid does not indirectly fuel its adversary’s actions. Abstention was not surrender, but it was a reminder that influence requires more than a seat at the table—it demands a louder, smarter voice.