IMF Refutes Claims Pakistan misused Bailout Funds against India

ISLAMABAD: The International Monetary Fund (IMF) has firmly rejected claims by Indian media that Pakistan may use EFF funds for military purposes, affirming that the disbursement is strictly reserved for economic stabilization and cannot be diverted to defense spending.

During a recent press briefing, IMF Communications Director Julie Kozack clarified that all financial assistance under the Extended Fund Facility (EFF) is channeled into Pakistan’s central bank reserves.

“IMF financing is provided solely to address balance of payments challenges—it is not designed or permitted for military use,” Kozack said.

IMF Reaffirms EFF Safeguards

To address concerns, Kozack emphasized that the EFF includes stringent safeguards that prevent misuse. These include a ban on central bank lending to the government, targets for reserve accumulation, and a series of structural reforms to ensure transparency and improve fiscal governance.

Responding to allegations from Indian outlets that Pakistan might use the IMF’s support to fund regions allegedly involved in cross-border terrorism, the IMF stressed that such actions are explicitly outside the scope of the EFF and would violate the program’s terms. Kozack warned that any deviation could jeopardize future disbursements.

Timeline of IMF-Pakistan Engagement

Kozack provided a detailed timeline, noting the current EFF program was approved by the IMF Executive Board in September 2024. A staff-level agreement for the first review was reached in March 2025, with the Board granting approval on May 9—formally unlocking the latest tranche.

Addressing governance and transparency, she mentioned that while the IMF Executive Board does not disclose voting outcomes publicly, decisions are typically made through consensus.

Kozack also expressed regret over the ongoing Pakistan-India tensions and the human cost involved, urging a peaceful diplomatic resolution. When asked about the departure of India’s Executive Director at the IMF, K.V. Subramanian, she clarified that such appointments are handled solely by the respective member country.

The IMF’s clarification comes at a critical time for Pakistan’s economic recovery and aims to dispel misconceptions regarding the EFF fund’s intended use.