India-Pakistan Tensions Escalate Over IMF Loan

India may challenge a proposed $1.3-billion International Monetary Fund (IMF) loan for Pakistan at the forthcoming board meeting of the global institution, according to three sources privy to the deliberations. This move comes as tensions between the two nations escalate following India's suspension of the Indus Waters Treaty.

Pakistan and the IMF reached an agreement in July 2024 for a $7-billion package under the extended fund facility. The programme necessitated Pakistan to implement effective policies and reforms to enhance macroeconomic stability, tackle fundamental structural issues, and establish conditions for robust, inclusive and sustainable growth.

IMF's Role in Pakistan's Economic Stability

The IMF is releasing the $7 billion in installments, and the board's approval is essential for the next $1 billion tranche to be released. Previously, India had abstained from casting its vote on the bailout package extended to its neighbour to bolster its struggling economy.

In this instance, India might cast a negative vote against IMF assistance to Pakistan, citing fund misappropriation and technical reasons, another source indicated.

Recent Developments in India-Pakistan Relations

Following the terrorist attack in Pahalgam, India has implemented various measures against Pakistan, including suspending the Indus Waters Treaty with the neighbouring nation. S Jaishankar, the external affairs minister, held discussions on Tuesday with his counterparts from seven non-permanent UN Security Council member nations. He is believed to have informed them about the cross-border connections to the April 22 terrorist incident that resulted in 26 civilian casualties.