Pindi's Fund Managers: How Washington keeps writing Pakistan a cheque through the IMF

The US commands a 16.49% voting share on IMF's executive board, the most by any single country, and well above the threshold required to block major decisions. This effective veto has long allowed Washington to shape IMF and its outcomes.

On Friday, IMF, under its extended fund facility (EFF), approved $1 bn to be disbursed to Pakistan. This, a few weeks after the latter's reported involvement in the April 22 Pahalgam terrorist attack. IMF's persistent extension of support to Pakistan-a country with a long track record of sheltering terrorist entities and utilising extremist proxies for strategic depth-raises difficult questions about consistency, conditionality and credibility.

Since 2008, Pakistan has repeatedly appeared on the Financial Action Task Force's (FATF) 'grey list' due to its persistent failure to dismantle terror financing networks. The contrast between stated counterterrorism principles and enabling of state-linked asymmetric activity reflects a structural dilemma in global governance.

India's abstention from voting on the IMF tranche to Pakistan called out an uncomfortable pattern: 28 IMF programmes in 35 years, with four in just the past five. This cycle of bailouts, absent structural reform or institutional accountability, risks becoming self-defeating.

External funds, when not ring-fenced with governance safeguards, enables emboldening of a military establishment that has historically resisted civilian oversight and supported non-state actors in the region. These concerns are borne of accumulated evidence, across decades, of fund fungibility, proxy militancy and regional destabilisation. They are now amplified by the geopolitical overlay of US-China strategic competition. In seeking to prevent deeper Chinese inroads into South Asia, Washington appears willing to accept a lower threshold of accountability for a strategically situated partner.

This is not unfamiliar terrain. During the Cold War, the US extended security and financial aid to authoritarian allies as a hedge against Soviet influence. In the post-9/11 era, Washington designated Pakistan a 'major non-Nato ally'. Today, the logic persists, shaped by a recalibrated theatre, but an unaltered script.

Pakistan's current economic condition is fragile. With over $130 bn in external debt and critically low foreign exchange reserves, it continues to rely on a mix of bilateral aid, deferred obligations and multilateral support. IMF itself acknowledges the tenuous nature of Pakistan's economic recovery. Yet, key fiscal inefficiencies- narrow tax base, opaque subsidies, expansive defence expenditures-remain largely untouched.

Concern, then, isn't about extension of assistance per se, but absence of enforceable conditionality and visible course correction. In the absence of structural reforms and greater transparency, such financial flows risk entrenching status quo power centres-most notably, Pakistan's military.

The pattern reinforces Islamabad/Rawalpindi's strategic doctrine: use provocation to test limits, subtle nuclear threats, deploy ambiguity, escalate with plausible deniability, rely on global interlocutors (read: Washington) to step in as 'crisis managers'.

In 2023, news platform The Intercept revealed covert arms sales by Pakistan to support US military needs in Ukraine, occurring in tandem with renewed IMF support. Earlier, the US was reportedly involved in diplomatic manoeuvres linked to the 2022 ouster of Pakistan's elected PM Imran Khan, amid disagreements over the country's stance on the Russia-Ukraine conflict.

These episodes point to a larger concern: that geopolitical expediency may override democratic accountability and institutional coherence.

Pakistan's military continues to channel significant resources toward strategic pursuits, including asymmetric actions targeting India. New Delhi's responses have, to date, been calibrated and restrained, limited to precision targeting of terror-linked infrastructure and military assets. But continued provocation risks narrowing that strategic patience.

The US has not hesitated to act beyond sovereign lines when its national security is implicated-through drone strikes, special forces deployments or cyber operations. That it demands such latitude for itself, but adopts a more permissive stance towards actors that employ terrorism as statecraft, reveals an asymmetry in its values.

The task ahead is not to deny Pakistan genuine humanitarian assistance it may require. It's to ensure that such assistance is anchored in transparent, enforceable and reform-linked frameworks. Anything less prolongs cycles of instability and continues terror-schooling as its existential policy.

IMF was designed to promote macroeconomic stability. Not to serve as a conduit for geopolitical balancing, strategic debt diplomacy, or state-driven terror financing. If its largest shareholder continues to shape decisions through the prism of strategic rivalry rather than economic merit, both moral authority and institutional credibility are at risk.

There's a message from Uncle Ben in Spider-Man to Uncle Sam: 'With great power comes great responsibility.' The Trump administration must decide whether its leadership will uphold the longer arc of principled global governance. As multipolarity deepens and trust in institutions erodes, that choice will matter far beyond South Asia.

The writer is a corporate adviser.



(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)