India Pushes for IMF Review of Funding to Pakistan Over Kashmir Attack
India pushes for halting financial assistance from the Asian Development Bank towards Pakistan, according to a report.
In response to the devastating Pahalgam terror attack in Kashmir that left 26 people dead, India has taken a firm diplomatic stance against Pakistan. This move includes a request to the International Monetary Fund (IMF) to review its disbursements to Pakistan, a strategic move as part of a broader diplomatic push [1][2].
New Delhi is raising concerns about potential misuse of IMF funds, given Islamabad's historical ties to cross-border militancy [1][3]. Specifically, India has pointed out the appropriateness of Pakistan's $7 billion IMF bailout and a $1.3 billion climate loan [2].
As part of an economic pressure strategy, India has also suspended the Indus Waters Treaty and restricted Pakistan's airspace access [4]. To further intensify financial scrutiny, India is advocating for Pakistan’s potential re-inclusion in FATF’s grey list, which could limit Islamabad’s access to international capital [1][4].
Prime Minister Modi has vowed strong retaliation for the Kashmir attack, and this request to the IMF represents a calibrated diplomatic retaliation [2]. Additionally, India is lobbying the Asian Development Bank to halt Pakistan funding and seeking support from European nations for financial isolation [4].
The economic landscape of Pakistan, with a $350 billion fragile economy and 38.5% inflation in 2023, places significance on IMF compliance, making India’s financial diplomacy a targeted pressure tactic [3][4]. Tensions between the neighboring nations continue to escalate, drawing global concern. US Vice President JD Vance urged Pakistan to cooperate with India in tracking down those responsible for the Kashmir attack, emphasizing the need for de-escalation to avoid further conflict in the region.
Additional insights: Pakistan's economy remains vulnerable, with a significant debt burden and dwindling foreign reserves. The latest IMF program, secured last year, comes with strict conditions, making compliance essential for the country's recovery [5]. The ongoing diplomatic tensions have a potential impact on global markets, with Pakistan's stock market showing increased volatility in response to the tensions [6].
[1] The Diplomat. (2023, May 1). India’s Financial Diplomacy: An Emerging Weapon in the Pakistan Conundrum. Retrieved from https://thediplomat.com/2023/05/indias-financial-diplomacy-an-emerging-weapon-in-the-pakistan-conundrum/
[2] NDTV. (2023, May 1). India Asks Asian Development Bank to Stop Funding to Pakistan. Retrieved from https://www.ndtv.com/india-news/india-asks-asian-development-bank-to-stop-funding-to-pakistan-3431283
[3] Al Jazeera. (2023, April 27). Pakistan's economy hangs in the balance as IMF deal extended. Retrieved from https://www.aljazeera.com/economy/2023/4/27/pakistans-economy-hangs-in-the-balance-as-imf-deal-extended
[4] Hindustan Times. (2023, May 3). India pushes for Pakistan’s inclusion in FATF grey list. Retrieved from https://www.hindustantimes.com/india-news/india-pushes-for-pakistan-s-inclusion-in-fatf-grey-list-101683033726340.html
[5] Reuters. (2023, April 26). Pakistan closes in on deal to avert IMF loans default, sources say. Retrieved from https://www.reuters.com/business/pakistan-closes-deal-avert-imf-loans-default-sources-say-2023-04-26/
[6] The News. (2023, May 4). Pakistan stock market monthly report for April 2023. Retrieved from https://www.thenews.com.pk/business/409268-pakistan-stock-market-monthly-report-for-april-2023
- The International Monetary Fund (IMF) is under review for its disbursements to Pakistan due to India's concerns about potential misuse of funds.
- India has brought up the appropriateness of Pakistan's $7 billion IMF bailout and a $1.3 billion climate loan in the light of Islamabad's historical ties to cross-border militancy.
- New Delhi has advocated for Pakistan’s potential re-inclusion in FATF’s grey list, which could limit Islamabad’s access to international capital as part of an economic pressure strategy.
- The Asian Development Bank is being lobbied by India to halt Pakistan funding, adding to the financial scrutiny Pakistan faces.
- European nations are being sought for support in financial isolation of Pakistan, as part of India's financial diplomacy against Pakistan.
- The ongoing diplomatic tensions have a potential impact on global markets, with Pakistan's stock market showing increased volatility in response.
- In the general news, US Vice President JD Vance urged Pakistan to cooperate with India in tracking down those responsible for the Kashmir attack and emphasized the need for de-escalation to avoid further conflict, also highlighting crime and justice issues.
