India asks IMF to reconsider Pakistan programme over 'terror funding'

• Big portion from IMF loan to be used for terror funding: Singh.
• India tried to stop IMF from granting approval but failed, says FO.
• FATF removed Pakistan from grey list in 2022 after progress.

Indian Defence Minister Rajnath Singh on Friday said that the International Monetary Fund (IMF) should reconsider a $1 billion loan to Pakistan alleging it was "funding terror", a move denounced by Islamabad as proof of New Delhi's desperation.

India and Pakistan last week clashed in the worst military violence in decades, killing around 70 people before agreeing a ceasefire that began Saturday.

The confrontations were sparked by an attack on tourists by gunmen in Indian Illegally Occupied Jammu and Kashmir (IIOJK) last month that New Delhi accused Islamabad of backing — a charge it denies.

"I believe a big portion of the $1 billion coming from IMF will be used for funding terror infrastructure," Singh told troops at an air force base in western India.

"I believe any economic assistance to Pakistan is nothing less than funding terror."

Despite India's objections, the IMF last week approved a loan programme review for Pakistan, unlocking a $1 billion payment which the state bank said has already been received.

A fresh $1.4 billion loan was also approved under the IMF's climate resilience fund.

India — which also represents Bhutan, Sri Lanka, and Bangladesh on the IMF board —abstained from the review vote with a statement from its finance ministry stating, "concerns over the efficacy of IMF programmes in case of Pakistan given its poor track record".

"India was the lone country which tried to stop it and it failed. It again reflects Indian frustration. Trying to criticise an institution like IMF speaks about this desperation," Pakistan's foreign ministry spokesman Shafqat Ali Khan told reporters.

Pakistan came to the brink of default in 2023, as a political crisis compounded an economic downturn and drove the nation's debt burden to terminal levels before being saved by a $7 billion bailout from the IMF which sparked further crucial loans from friendly nations.

Removed from watchlist

Pakistan, which has long battled militancy within its borders, has faced scrutiny over its ability to combat illicit financing and in 2022 was put on an international money-laundering watchlist.

However, the Financial Action Task Force removed Pakistan from its so-called grey list in 2022 after "significant progress".

Britain's Foreign Secretary David Lammy met with his Pakistani counterpart Ishaq Dar in Islamabad on Friday, where the two discussed the ceasefire, according to a statement from Pakistan's foreign ministry.

It came as the government also held ceremonies across the country to celebrate the military.

"Pakistan's Armed Forces remain fully prepared and resolutely committed to defending every inch of our territory. Any aggression will be countered," Prime Minister Shehbaz Sharif said while visiting troops on Thursday.

The disputed Muslim-majority region of Kashmir has been at the heart of several wars between the two neighbours.