In recent months, Pakistan has received billions of dollars in loans from international financial institutions like the Asian Development Bank (ADB) and the International Monetary Fund (IMF). Just recently, ADB sanctioned $800 million in funding, while IMF not only released $1 billion in immediate support but also approved an additional $1.3 billion in new loans.
This has raised eyebrows—especially in India, which openly opposed the funding following terror-related incidents like the Pahalgam attack. So why do global institutions continue to bail out Pakistan, despite its poor economic track record and rising concerns about misuse of funds?
Let’s break it down in simple terms.
How Deep Is Pakistan’s Economic Crisis?
Pakistan’s economy is on the verge of collapse. Its foreign reserves fell to just $3 billion in 2023—barely enough to cover even one month of imports. The devastating floods of 2022 caused damages worth over $30 billion. With minimal revenue generation and a spiraling debt crisis, Pakistan is teetering on the edge of default.
IMF and ADB loans are not simply gestures of goodwill—they are lifelines meant to keep the country from economic freefall.
Why Do Global Institutions Keep Lending to Pakistan?
- To Prevent a Global Domino Effect
If Pakistan defaults on its nearly $130 billion debt, the shockwaves would ripple through the global financial system, especially affecting banks and lenders with heavy exposure to developing nations. In short, Pakistan is “too big to fail.” - To Maintain Strategic Influence
Pakistan’s geographic location is key. It shares borders with China, India, Afghanistan, and Iran—making it a critical player in regional geopolitics. Western powers want to keep Pakistan within their sphere of influence and prevent it from drifting too far into China’s orbit. - Loans Come With Strings Attached
Every dollar lent by IMF or ADB comes with strict economic conditions—tax hikes, subsidy cuts, and privatization of state-owned enterprises. These reforms not only stabilize the economy temporarily but also open doors for Western corporations to enter new markets.
Global Institutions Are Also Trapped
IMF and ADB aren’t handing out money blindly—they’re often forced into this cycle due to:
- The Size of Pakistan’s Debt
Pakistan owes so much money that a total collapse would hurt the very institutions lending to it. It’s a classic case of “if you owe the bank a billion dollars, you own the bank.” - China’s Expanding Footprint
China has already invested heavily in Pakistan through the China-Pakistan Economic Corridor (CPEC). By continuing to fund Pakistan, the West hopes to balance Beijing’s growing influence. - Bureaucratic Lending Frameworks
International lending bodies operate within technical frameworks. They assess fiscal metrics—not political realities like terrorism or corruption. Hence, they can’t always deny loans based on moral or geopolitical concerns.
Why India’s Opposition Isn’t Working
India has raised strong objections, especially after terror attacks like Pahalgam. It argues that international funds could indirectly support terrorism. Yet, its protests are often overruled because:
- India has limited voting power in institutions like IMF and ADB
- The U.S. and EU control the decision-making majority
- China, a major player in both institutions, supports loans to Pakistan
- Pakistan was removed from the FATF grey list in 2022, improving its creditworthiness
How Big Powers Use Debt as a Strategic Weapon
Debt isn’t just an economic tool—it’s a geopolitical one.
- The U.S. leverages financial aid to influence Pakistan’s stance on issues like Afghanistan
- China uses CPEC investments to deepen its control in South Asia
- Western corporations benefit from the privatization mandates attached to IMF loans, acquiring undervalued Pakistani assets
- Loans shift national policies, ensuring recipient countries like Pakistan adopt pro-West economic models
In the 1980s, the U.S. used financial aid to pull Pakistan into the Afghan war. Today, similar patterns are being repeated in different forms.
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