India is set to oppose the World Bank’s planned loan to Pakistan, expressing concerns that such financial aid could indirectly support cross-border terrorism. India fears that funds meant for development might be diverted to arms purchases or terror-related activities. A similar opposition was earlier raised by India during the IMF’s bailout support to Pakistan.
Planned World Bank Loan
The World Bank had agreed in January 2024 to provide Pakistan with $20 billion in loans over the next decade. The funds are aimed at addressing climate change and promoting private sector growth. However, India believes such aid could be misused and plans to object strongly to this funding.
India’s Concerns with IMF Aid
India has previously argued that Pakistan increases arms purchases following financial aid from institutions like the IMF. During a past $1 billion IMF bailout, India abstained from voting and urged the IMF to consider Pakistan’s track record in terror financing and the reputational risk involved in approving such support.
Push to Re-List Pakistan in FATF Grey List
India is also planning to reach out to the Financial Action Task Force (FATF), seeking to have Pakistan re-included in the grey list. Pakistan was removed from the list in 2022, which improved its standing with global financial institutions. India believes a return to the grey list would restrict Pakistan’s access to international funding.
What the FATF Grey List Means
Countries placed on the FATF grey list are considered weak in controlling terror financing, money laundering, and arms proliferation. These countries are placed under increased monitoring and are required to implement reforms. Pakistan was earlier placed on the grey list in 2018 and had to follow an action plan to address these issues.
Justification by the IMF
In response to concerns, the IMF has maintained that Pakistan met all conditions required for its bailout package. According to IMF Communications Director Julie Kozak, the funds were deposited in the Central Bank of Pakistan’s reserves and were not used for direct government spending or defense financing.
Criticism of Lending Institutions
Critics argue that repeated financial support to nations with questionable terror links undermines global anti-terror efforts. While the IMF and World Bank claim their goal is economic stabilization and reform, continued aid to countries like Pakistan is viewed by some as ethically problematic
