India is gearing up to oppose a fresh round of financial assistance to Pakistan, this time from the World Bank, amid growing concerns that international funding may be misused to support cross-border terrorism. After voicing its objections to a recent IMF bailout package, India now plans to raise strong opposition to a World Bank proposal that would provide Pakistan with $20 billion over the next decade. The World Bank loan is intended to address climate change impacts and boost private sector development in Pakistan. However, India maintains that such funding, despite its stated objectives, could be diverted to bolster Pakistan’s military capabilities or support terrorist networks operating against India. A key Indian argument is that each time Pakistan secures a loan from global institutions like the IMF, it ramps up its arms purchases, undermining regional stability.
India’s Permanent Representative to the United Nations and financial watchdogs is reportedly preparing a diplomatic campaign to challenge this funding. A significant part of this strategy involves approaching the Financial Action Task Force (FATF), the global financial crime watchdog, with a formal request to re-list Pakistan on its “grey list.” Pakistan was removed from the FATF grey list in 2022, a move that improved its credibility with international lenders. However, India believes that Islamabad has continued to shelter terror networks and fund cross-border violence. Returning Pakistan to the grey list would subject it to increased scrutiny and stricter financial monitoring, which could potentially limit its access to international funds.
The FATF grey list includes countries that exhibit deficiencies in combating money laundering, terror financing, and arms proliferation. Nations on this list are subjected to close monitoring and are expected to work on action plans to address these concerns. Pakistan was previously grey-listed in 2018 and faced significant financial restrictions during that period. Critics of the IMF and World Bank argue that their continued financial support to Pakistan undermines international counter-terrorism efforts. They claim that despite conditions and reforms imposed by these institutions, repeated bailouts to a country accused of funding terror groups raise ethical and strategic concerns. India had earlier abstained from voting on a $1 billion IMF bailout package for Pakistan, warning of reputational risks. While the IMF claims Pakistan has met its targets and that funds are directed to the central bank’s reserves, India remains unconvinced and determined to block any similar funding efforts through international forums.