India Ramps Up International Pressure on Pakistan Amid Growing Tensions

India is escalating its campaign to internationally isolate Pakistan following rising tensions between the two countries. New Delhi aims to impede development funding by reaching out to multilateral agencies and global partners. Finance Minister Nirmala Sitharaman recently urged the Asian Development Bank (ADB) President Masato Kanda in Milan to withhold funds directed towards Pakistan. The ADB's current engagements in Pakistan include 53 loans and 3 grants amounting to USD 9.13 billion, effective as of 2024.

Simultaneously, India is contemplating raising issues with the International Monetary Fund (IMF) regarding Pakistan's financial relief package as the IMF board prepares for a review meeting on May 9. Relations have soured post the April 22 terrorist attack in Pahalgam, Jammu and Kashmir, which led to 26 deaths. Consequently, diplomatic interactions have been significantly downgraded.

Further steps to debilitate Pakistan's economic resilience include a planned request for the Financial Action Task Force (FATF) to greylist Pakistan, restricting Islamabad's access to funding. Additionally, discussions with Italy's Finance Minister Giancarlo Giorgetti highlighted India's demand for cutting financial flows from Italy to Pakistan, a part of broader punitive actions. India is also seeking collaboration with European nations to enforce stringent checks on international financial support funneled to Pakistan.

Moody's report amplified concerns, noting intensified Indo-Pakistan tensions could sever Pakistan's financial access, pressuring its foreign reserves. Pakistan's reserves already lag behind approximately required external debt payments for upcoming years. Conversely, Moody's depicted a favorable outlook for India, citing stable macroeconomic conditions fueled by public investments and robust private consumption.

In response to the Pahalgam incident, India suspended the Indus Waters Treaty of 1960, with Prime Minister Narendra Modi granting the Indian armed forces full autonomy over strategic responses to Pakistan. The escalating climate continues to strain bilateral ties, with significant implications for regional stability.

(With inputs from agencies.)