Just days after India urged the International Monetary Fund (IMF) to reconsider its financial aid to Pakistan, the global lender has come forward to defend its decision to release the next tranche of its bailout program. The IMF maintains that Pakistan had fulfilled all the required conditions to receive the $1 billion (over ₹8,000 crore) payout.

This latest funding came as tensions between India and Pakistan flared once again, with cross-border firing incidents following India’s Operation Sindoor—a military strike targeting terror infrastructure in Pakistan and Pakistan-Occupied Kashmir (PoK).

India expressed serious concerns over the timing and implications of the financial aid. Defence Minister Rajnath Singh called the support a “form of indirect funding to terror,” accusing Pakistan of continuing to allow its soil to be used for launching attacks on Indian citizens.

The IMF has so far disbursed $2.1 billion to Pakistan under its Extended Fund Facility (EFF), a part of a broader $7 billion agreement reached last year. Addressing the controversy, Julie Kozack, Director of IMF’s Communications Department, explained that the decision was based strictly on Pakistan’s compliance with the program’s terms.

“Our Board found that Pakistan had met all of its targets and had made progress on key reforms,” Kozack said during a press briefing. “The staff-level agreement for the first review was reached on March 25, 2025, and was approved by our Executive Board on May 9. That’s when the latest disbursement was made.”

Kozack also took a moment to address the regional conflict. “We are deeply saddened by the human toll of the recent violence. We sincerely hope for a peaceful resolution between India and Pakistan,” she added.

What’s New in the IMF Conditions?

As part of the deal, the IMF imposed 11 new conditions on Pakistan for future disbursements. Among the key requirements:

• Parliament must approve a new budget totaling Rs 17.6 trillion.
• Electricity bills will see a higher debt servicing surcharge.
• Restrictions on importing older used cars (over three years) must be lifted.

Other structural reforms include:

• A plan to phase out incentives for Special Technology Zones and industrial parks by 2035.
• Legislation to make the Captive Power Levy Ordinance permanent by the end of May.
• A roadmap outlining the financial sector’s institutional and regulatory strategy post-2027.

These conditions come with a warning. According to reports, the IMF has cautioned that continued tensions with India could pose significant risks to Pakistan’s fiscal and reform progress.

As the region watches closely, the IMF finds itself walking a tightrope—balancing financial support with geopolitical realities, while both India and Pakistan continue to grapple with the consequences of conflict.