IMF Loan Linked to Ceasefire? How $1-Billion Lifeline Influenced India-Pakistan Truce
First Published: 11th May, 2025 16:35 IST
India abstained from voting on the IMF loan approval, raising concerns over the potential misuse of debt financing funds for state-sponsored cross-border terrorism
After days of intense cross-border shelling and military posturing, India and Pakistan agreed to a ceasefire, reportedly influenced by a critical $1-billion loan from the International Monetary Fund (IMF) to Pakistan. The United States is said to have exerted pressure on Islamabad to agree to the ceasefire, making the provisional release of the IMF loan contingent on immediate de-escalation, India Today reported.
The IMF board, which met on May 9, 2025, cleared a $1-billion tranche for Pakistan as part of its $7-billion Extended Fund Facility (EFF) and an additional $1.3 billion under the Resilience and Sustainability Facility (RSF). According to Business Today, the US played a crucial role in securing the ceasefire by directly linking the loan to an immediate halt in hostilities. Pakistan is heavily reliant on financial support from multilateral agencies, with its external debt standing at $130 billion in 2024, including $6.2 billion owed to the IMF as of March 31, 2025.
Direct Pressure from Washington
US President Donald Trump took credit for brokering the deal, stating in a post on Truth Social on May 10, 2025, that the agreement followed a “long night of talks” mediated by the United States. Trump said, “After a long night of talks mediated by the United States, I am pleased to announce that India and Pakistan have agreed to a FULL AND IMMEDIATE CEASEFIRE. Congratulations to both countries on using common sense and great intelligence.”
US Vice President JD Vance and US Secretary of State Marco Rubio also played active roles in the de-escalation. Rubio, in a press release, stated that he had spoken to senior Indian and Pakistani officials, including Prime Ministers Narendra Modi and Shehbaz Sharif, External Affairs Minister Subrahmanyam Jaishankar, Pakistan Army Chief General Asim Munir, and National Security Advisors Ajit Doval and Asim Malik. Rubio praised the leaders for their “wisdom, prudence, and statesmanship” in choosing the path of peace.
Ceasefire Initiated by Military Call
However, Indian officials have maintained that the ceasefire was a bilateral arrangement worked out through direct military communication, not through diplomatic channels. On May 10, India’s Foreign Secretary Vikram Misri confirmed that the arrangement was initiated by a call from Pakistan’s Director General of Military Operations (DGMO) at 15:35 IST. “It was agreed between them that both sides will stop firing and military action on land, air, and sea from 17:00 hrs IST today,” Misri said. The two DGMOs are set to speak again on May 12.
India’s Protest Over IMF Loan
India abstained from voting on the IMF loan approval, raising concerns over the potential misuse of debt financing funds for state-sponsored cross-border terrorism. An official release by the Indian Ministry of Finance stated that India questioned the efficacy of IMF programs for Pakistan, citing its “poor track record” in managing economic crises and the possibility of funds being diverted for military purposes.
Pakistan, struggling with a severe economic crisis, has been reliant on international loans to manage its financial obligations, including paying interest on other debts. The recent $1-billion IMF tranche, therefore, served as a financial lifeline, making it difficult for Pakistan to reject the ceasefire condition, despite the ongoing hostilities with India.
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