Blood Money? India Warns IMF Against Funding Pakistan a ‘Terror State’

India on Thursday launched a strong diplomatic offensive at the International Monetary Fund (IMF), firmly opposing fresh financial assistance to Pakistan. As the IMF reviewed Pakistan’s $1 billion Extended Fund Facility (EFF) and considered an additional $1.3 billion under the Resilience and Sustainability Facility (RSF), India questioned the wisdom of aiding a nation it accused of sponsoring terrorism, mismanaging its economy, and undermining regional stability. The move has sparked outrage across social media, with critics dubbing the bailout the "Islamist Mujahideen Fund"—a grim joke at the expense of global credibility.

"Islamist Mujahideen Fund": Internet Roasts IMF for Bailing Out Pakistan Again

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— Meme Farmer (@craziestlazy) May 9, 2025

Terrorist Attack in Pahalgam: A Deadly Provocation

India’s stance hardened in the wake of the April 22 Pahalgam terror attack, where 26 tourists—specifically targeted on the basis of their religion—were killed by Pakistan-sponsored militants. The attackers reportedly asked each civilian their religion before executing only Hindus and Christians, sparing Muslims. This targeted killing has escalated tensions dramatically, prompting swift military and diplomatic retaliation from India. 

Operation Sindoor: India Strikes Back

In a decisive countermeasure, India carried out Operation Sindoor in the early hours of May 7, launching precision airstrikes on multiple terror camps inside Pakistan-administered territory. The operation is said to have eliminated at least 90 terrorists, many of them high-ranking members of groups like Jaish-e-Mohammed and Lashkar-e-Taiba.

With both countries on high alert, the situation along the Line of Control (LoC) and international border has escalated into a war-like scenario, marked by missile strikes, drone incursions, and heavy shelling. In this context, many have raised serious concerns that any new IMF disbursements could be diverted to procure arms and prolong military confrontation, rather than fostering economic recovery. This warning is echoed by geopolitics experts worldwide, who caution that continued funding could escalate the conflict instead of containing it.

"The only way to change Pakistan is for America and the IMF to stop bailing out PAK's economy," explains scholar Christine Fair pic.twitter.com/yCwunptK5m

— Shashank Mattoo (@MattooShashank) May 8, 2025

Foreign Aid Misused: A Pattern of Deception

India highlighted what it described as a long-standing pattern of misuse of international financial aid by Pakistan, noting that funds from global institutions and foreign governments have often been used not for development, but to finance terror networks operating in Indian Jammu and Kashmir.

There is a widely shared view within the Indian delegation—and supported by other nations—that Pakistan’s economic challenges are deeply entwined with its military establishment, which has historically diverted civilian funds for defense purchases and militant activity.

A Serial Borrower With Little Reform

India underscored Pakistan’s repeated engagement with the IMF as a chronic borrower, having received disbursements in 28 of the past 35 years. Observers from the Indian side noted that if previous IMF programs had been effective, Pakistan wouldn’t need a fourth bailout in just five years, suggesting deep-rooted structural failures in both implementation and monitoring.
The point resonated with many: despite receiving assistance nearly every year, Pakistan's external debt has ballooned to over $131 billion, and its macroeconomic indicators remain fragile.

Military’s Grip on Pakistan’s Economy

Adding to the concern, India flagged the Special Investment Facilitation Council, led by Pakistan’s military, as proof that economic decision-making is heavily militarized. Analysts warned that this structure undermines civilian reforms and redirects international funds to serve the strategic and financial interests of the armed forces.

International references, including a 2021 UN report, identified the Pakistani Army as operating the largest business conglomerate in the country. These concerns remain relevant and unresolved, reinforcing skepticism about IMF-led reforms.

IMF Oversight and Credibility Under Scrutiny

India and other concerned nations questioned the design and credibility of IMF programs, citing the Fund’s own report on the “Prolonged Use of IMF Resources,” which noted that political considerations often shape lending decisions, especially regarding Pakistan.

There is growing concern that Pakistan is becoming a “too big to fail” borrower—relying on IMF bailouts as a cushion against its own governance failures, while continuing actions that destabilize its neighborhood.

 Rethinking Lending: Ethics Must Matter

Across several IMF boardrooms, a shared argument emerged: financial decisions must also account for moral and strategic realities. There is a view that continued funding to a nation engaged in cross-border terrorism and active military escalation undermines the credibility of donor institutions and sends a dangerous message to the global community.

It was also highlighted that international aid is inherently fungible, and in Pakistan’s case, susceptible to misuse for bolstering military operations or sustaining terror networks.

India’s Abstention and a Global Warning

While procedural constraints prevented a direct veto, India’s abstention from the IMF vote on Pakistan’s RSF package sent a strong diplomatic signal. With no provision for a “no” vote, abstention became the language of protest. Several member nations echoed India’s concerns, demanding greater safeguards, transparency, and strict conditionality in future disbursements.

The IMF has acknowledged these apprehensions and pledged to reassess its oversight mechanisms. But as tensions between India and Pakistan escalate, pressure is mounting on global financial institutions to rethink not just how they lend—but whom they legitimize in the process.

 The world is now witnessing a nuclear-armed state unravel—its military bombing religious sites, its civilians suffering, its economy steered by generals. The IMF’s decision to release fresh funds has not only triggered strategic anxiety but also moral outrage. Critics argue that by extending yet another bailout, the IMF is no longer just enabling economic collapse—it’s indirectly financing terror.

India’s abstention wasn’t mere symbolism—it was a warning flare. And online, the verdict is unforgiving: the IMF hasn’t just miscalculated its economics—it may have lost its moral compass.

The backlash has crystallized into one biting phrase now reverberating across global platforms: “Islamist Mujahideen Fund”—a stinging indictment of a bailout gone dangerously wrong.