‘Not the right time’: FM Nirmala Sitharaman had flagged IMF loan to Pakistan, say govt sources

India not opposed to Pakistan IMF aid, but says ‘now not the right time’

India had raised strong reservations over the timing of an International Monetary Fund (IMF) loan to Pakistan, citing ongoing cross-border tensions and concerns over the strategic implications of such financial assistance, senior government sources said on May 23.

Government sources clarified that while India is not opposed in principle to Pakistan receiving development financing from the IMF, the current geopolitical climate made it “not the right time” for disbursal of the loan.

“Not against Pakistan receiving the IMF development fund, but it was not the right time due to the border situation,” a senior source stated. The concern was formally conveyed to IMF Managing Director Kristalina Georgieva by Finance Minister Nirmala Sitharaman prior to her recent visit to Milan, the official source said.

During her visit, Sitharaman also held bilateral discussions with her German, Italian, and French counterparts, reiterating India's objections to the IMF loan package scheduled for approval. India subsequently abstained from voting on the matter during the IMF Executive Board deliberations.

India also pointed to the IMF’s own historical data, which it claimed shows a pattern of increased arms procurement by Pakistan in the same years it has received IMF support. “IMF was conveyed that its own data also shows that every time IMF gives a loan to Pakistan, there has been increased arms procurement by Pakistan in the same year,” the source said.

According to the public data, Pakistan spends on average around 18 per cent of its general budget on “defense affairs and services”, while even the conflict-affected countries spend on average far less (10-14 per cent of their general budget expenditure). Further, Pakistan’s arms imports increased dramatically from 1980 to 2023 by over 20 per cent on average in the years when it received IMF disbursements in comparison to years when it did not receive the same.

This time, the IMF has imposed unusually specific fiscal conditions on Pakistan as part of the loan programme, including mandatory parliamentary approval of its 2025–26 federal budget by June 2025, conditions not typically linked to sovereign lending by the Fund. “IMF put conditions relating to Pakistan's budget, which is not normally done,” the source added.

Sources said the efforts aimed to flag the regional security risks of releasing funds to Islamabad amid tensions, rather than blocking the programme altogether.

However, the IMF went ahead with approving a $1 billion (over Rs 8,000 crore) aid package for Pakistan, even as India raised objections. The disbursal came around the same time Pakistan reacted to India’s Operation Sindoor.