Do IMF Bailouts Provide Pakistan Cover To Plan Terror Attacks Like Pahalgam?
As Pakistan seeks another $1.3 billion from the IMF, India warns the funds may be propping up terror, not just the economy
As the International Monetary Fund (IMF) prepares to review a $1.3 billion disbursement to Pakistan on May 9, a critical question is taking centre stage: Are international bailouts, meant to stabilise fragile economies, indirectly enabling Pakistan’s terror infrastructure — including attacks like the one in Pahalgam?
For India, the answer is increasingly clear: yes, not by direct funding, but by propping up a system that frees resources, shields proxy networks, and insulates military intelligence operations long linked to cross-border terrorism.
Recommended Stories
This isn’t just rhetoric. On May 7, India backed its concerns with action, launching Operation Sindoor — a precision military strike targeting nine terror launchpads across Pakistan and Pakistan-occupied Kashmir (PoK). The diplomatic message was unmistakable: terror cannot be subsidised — not by aid, and certainly not by the IMF.
The Link India Is Making: Bailouts, Budgets & Bloodshed
India’s contention is not that IMF funds are wired directly to terror cells — but that these bailouts liberate Pakistan’s internal finances, allowing the state to redirect domestic resources to its military-intelligence ecosystem, including the ISI, and terror groups like Lashkar-e-Taiba (LeT) and Jaish-e-Mohammed (JeM).
While the IMF’s disbursements are earmarked for balance-of-payments or climate resilience, they relieve fiscal pressure on Islamabad, letting its own funds flow unchecked to strategic priorities, including those India alleges are deeply enmeshed with proxy warfare.
In New Delhi’s view, this is not a bug in the global system — it’s the entire problem.
Pahalgam: Where The Debate Turned Deadly
The tipping point came on April 22, when gunmen disguised in army fatigues ambushed a tourist group in Baisaran Valley, Pahalgam, killing 26 civilians. The Resistance Front (TRF), widely seen as a LeT front, initially claimed responsibility. Though it later withdrew the claim, Indian intelligence maintains that cross-border handlers, encrypted communications, and digital forensics tied the attack to Pakistan-based infrastructure.
Recovered devices reportedly bore signatures linked to earlier LeT-led assaults, reinforcing India’s belief that Pahalgam was not an isolated terror strike, but the output of a funded, protected, and cross-border network.
Operation Sindoor: From Evidence To Action
India’s military response — Operation Sindoor — struck nine locations across PoK and Pakistan, including Muzaffarabad, Bahawalpur, Sialkot, and Kotli — areas known to house LeT, JeM, and Hizbul Mujahideen assets. Satellite imagery later confirmed structural damage.
Crucially, no Pakistan Army bases were targeted. The operation was framed as counterterrorism, not retaliation, but the real audience wasn’t just Islamabad. It was the international community, especially financial institutions, that, in India’s view, continue to fund a state that exports terror while playing victim.
Pakistan’s IMF Dependency: A Pattern With No Reform
Since its first IMF agreement in 1958, Pakistan has entered 23 programmes, averaging one every three years. Structural adjustment packages in 1988, 1994, 2001, and 2008, and more recently:
- 2013: $6.6 billion
- 2019: $6 billion
- 2024: $7 billion bailout
- 2025 (pending): $1.3 billion under climate-linked support
While these funds are framed as lifelines, critics — including former IMF insiders — say Pakistan has repeatedly failed to implement structural reforms. The 2024 review praised short-term stability but flagged a familiar problem: reform backslides once disbursements begin.
India’s Core Charge: IMF Bailouts, Terror Budgets
New Delhi argues that every IMF bailout stabilises Pakistan’s balance sheet — and frees up space for opaque spending elsewhere. This includes:
- Military R&D
- Cross-border surveillance infrastructure
- ISI-linked recruitment networks
- Religious front organisations used to mask radicalisation and logistics
Groups like Jamaat-ud-Dawa continue to operate freely in Pakistan, despite being sanctioned internationally — a fact India says proves how state complicity masks itself behind economic crisis narratives.
What Global Think Tanks Say
India isn’t alone in this critique. Research bodies like the Hudson Institute and Foundation for Defense of Democracies have highlighted Pakistan’s pattern of:
- Diverting resources to non-transparent defence priorities
- Operating terror training camps with state protection
- Maintaining selective compliance during FATF grey-listing
Even FATF’s grey-listing (2008–2015, 2018–2022) failed to dismantle these terror ecosystems — largely because financial pressure was always offset by global bailouts.
IMF’s Bind: Economic Stability Vs Security Risk
For the IMF and Western backers, the dilemma is real. Cutting Pakistan off could accelerate:
- Economic collapse
- Mass migration
- Chinese strategic penetration
But turning a blind eye to India’s charge — that IMF funding is enabling a bloodstained status quo — carries its own consequences.
India has formally urged the IMF, World Bank, and Asian Development Bank to reassess financial assistance to Pakistan in light of the Pahalgam massacre. New Delhi has raised concerns that such aid may inadvertently support terror infrastructure.
Previously, India had chosen to abstain from voting on IMF assistance to Pakistan, preferring not to obstruct multilateral economic relief despite deep bilateral tensions. However, the Pahalgam massacre and mounting evidence of cross-border complicity have prompted a serious policy rethink.
According to a report in the Economic Times, a government source confirmed that India is now considering opposing the $1.3 billion loan, citing concerns that such support “could indirectly end up funding terror operations."
In an assertive diplomatic signal, India also appointed Parameswaran Iyer, Executive Director at the World Bank, to temporarily represent it on the IMF board — a move seen as reinforcing India’s intent to raise objections at the highest level of global financial governance.
Defence First, Development Later: Pakistan’s Fiscal Priorities
India’s alarm over how IMF bailouts may free funds for terror is tied to a broader fiscal reality: Pakistan has historically prioritised military spending over economic reform. Despite persistent financial crises and international scrutiny, Pakistan’s defence allocation remains among the highest as a share of GDP in the region, and continues to rise even during periods of economic contraction.
In FY2024–25, Islamabad allocated over Rs 2.1 trillion for defence, a figure that excludes military pensions and strategic projects often classified as “contingency" or “security" spending. By contrast, development expenditure, particularly in health, education, and job creation, has been slashed repeatedly to meet deficit targets.
This imbalance, critics argue, reflects not just poor economic management but deliberate statecraft, where national security is equated with military might, and where the military’s strategic dominance skews budget priorities in its favour.
Such budgeting patterns — shielded from parliamentary scrutiny and often financed by international lenders — are what India fears may continue if IMF funds are disbursed without accountability mechanisms.
The Bottom Line: Is The IMF Enabling Terror?
So, is the IMF knowingly helping Pakistan fund attacks like Pahalgam?
No. But is it enabling a system where economic bailouts prop up a state that funds, protects, and deploys proxy terror networks?
India says yes — and it’s done waiting for the world to catch up.
The debate isn’t just about fiscal discipline anymore. If the money stabilises a regime that uses its freedom to fund bloodshed, then the global financial system, knowingly or not, becomes a stakeholder in terror.
As The May 9 Vote Looms
The IMF must now choose between economic rescue and strategic responsibility. For India, the message is non-negotiable: Terror cannot be financed — not through state budgets, not through proxy fronts, and certainly not through IMF packages.
As the IMF board prepares for its vote, one question towers above the rest: Can the world afford to keep financing Pakistan, without knowing what else it might be financing along the way?
- Location :
- First Published: