State-Sponsored Terrorism and Pakistan:Will the financial action task force, established by the G7, take notice?

On May 9, the IMF Board of Executive Directors made two key decisions, dismissing India's objections:

- Dr. T. K. Jayaraman

(i) the release of the second tranche of $1 billion to Pakistan under the $7 billion Extended Fund Facility (EFF), a 37-month bailout program approved in September 2024 to support Pakistan's economic stability and growth, and

(ii) approval of a fresh loan of $1.4 billion under the Resilience and Sustainability Facility (RSF), with immediate disbursement, bringing the total to $2.4 billion, all at one go.

India protested the agenda item on the day it was tabled—coinciding with the ongoing four-day “Operation Sindoor,” a ceasefire for which was only announced the following day. India argued that Pakistan might divert IMF funds to support cross-border terrorist activities and urged the IMF not to approve the disbursement. However, no other Executive Director raised objections, and the Board proceeded with the approval.

Since IMF procedures do not allow for a formal “no” vote, India's objection was recorded as an “abstention.” This type of abstention is not without precedent. In 1981, the U.S. abstained from voting on a $5.8 billion IMF loan to India, arguing that the funds, which were offered on concessional terms, would be used for development rather than to pay for oil imports. The loan was nonetheless approved on November 10, 1981.

During another economic crisis in 1991-93, India turned again to the IMF. It received $2.2 billion under two Standby Arrangements and another $1.4 billion under the Compensatory Financing Facility, totalling $3.6 billion. These loans came with strict conditions, including devaluation of the rupee, austerity measures, and public expenditure controls—hallmarks of the Washington Consensus. These reforms, unpopular in many countries, were deeply resented in Latin America, where the IMF was infamously dubbed the “International Misery Fund.”