The International Monetary Fund’s decision to approve the disbursement of a fresh $1 billion tranche to Pakistan under the Extended Fund Facility, along with an additional $1.4 billion under the Resilience and Sustainability Facility, has sparked not just economic debate but serious geopolitical and ethical concerns. At a time when evidence of Pakistan’s continued complicity in cross-border terrorism is mounting, the move by a Western-backed financial institution sends the wrong and dangerously permissive message to the global community. Despite India’s protest and abstention at the IMF board, citing Pakistan’s poor track record on both financial reforms and counterterrorism obligations, the disbursement was approved. India’s objections were not without precedent. Multiple international reports, including those from the UN and FATF, have highlighted the deep entanglement of Pakistan’s military and intelligence services with terrorist networks that operate not only within its borders but far beyond.
What makes this IMF decision particularly troubling is the nature of its timing. Within hours of the disbursement, missile and drone incursions were reported across the Indian border-a chilling reminder that economic aid to regimes with militarised agendas can have immediate consequences. For years, Pakistan has displayed a pattern: when pushed to the brink economically, it signals reform; when flush with foreign funds, it defaults to aggression. Financial relief too often becomes fuel for geopolitical defiance. Therein lies the heart of the problem. Western nations that underwrite the IMF have long espoused values of democracy, transparency, and peace. Yet, through this funding mechanism, they are enabling a regime that has consistently undermined those very principles. It is an institutional paradox-preaching accountability while subsidising impunity. This approval also risks transforming global financial institutions into unwitting sponsors of instability. Critics might argue that the IMF’s mandate is to stabilise economies, not adjudicate political or moral disputes. But in an interconnected world, the lines between economics and geopolitics are blurred. Money exhibits fungibility. The argument that funds are earmarked for reforms like tax restructuring or climate resilience loses weight when the very state apparatus overseeing these programmes is riddled with military interference and opaque financial flows. It is naïve, even negligent, to assume that funds given to a country with such a track record can be perfectly compartmentalised.
Moreover, this move severely weakens the global campaign against terrorism financing. It signals to other countries that harbour extremist elements that international scrutiny can be bypassed and that economic mismanagement, coupled with tactical diplomacy, can secure bailouts regardless of moral or security concerns. Pakistan has received monetary relief 24 times in the last few decades with the fewest reforms. It is a perverse incentive structure-one that emboldens rogue states rather than deterring them.
India’s concerns represent more than bilateral tension. They underscore a fundamental flaw in the global financial order: the absence of meaningful security-related conditionalities in funding decisions. When a state consistently uses international assistance to relieve internal pressure only to redirect its energies toward military posturing and extremist proxies, the logic of aid collapses. Furthermore, such funding undermines regional efforts to contain terrorism. Countries like India, which bear the brunt of cross-border attacks, are left to question whether the institutions they support financially are inadvertently working against their national security interests. This growing disconnect could have long-term consequences for the legitimacy and cohesion of multilateral organisations.
It is not enough for the IMF to claim procedural constraints or technical neutrality. Global institutions must evolve with global realities. Economic reform cannot be pursued in a vacuum when the very fabric of regional peace is at stake. The IMF must consider incorporating security vetting and governance reforms as prerequisites for future disbursements-especially in cases where civilian governments are mere facades behind which militaries manipulate both policy and power. The world cannot afford such moral complacency. To reward a state with a consistent pattern of supporting terror undermines the very foundation of a rules-based international order. It is time for global institutions to align their funding decisions with the values they claim to protect.
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