Pakistan Debt Servicing (1961-2023)
In the years since the Paris Agreement, international financial institutions (IFIs) such as the IMF, World Bank, and Asian Development Bank have rapidly recast themselves as champions of climate action. Yet, as countless environmental defenders around the world have observed—and as our work at ALC confirms—their climate rhetoric masks a deeply extractive and harmful reality. Behind the language of “resilience,” “stability,” and “green growth,” these institutions continue to impose austerity and debt regimes that devastate local communities and accelerate regional climate breakdown.
When the 2022 floods inundated half of Pakistan—killing 1,600 people and causing nearly $40 billion in losses and damages—the IMF and World Bank were rebranding debt and austerity as climate policy. Pakistan became the testing ground for this new experiment in green austerity. Under the IMF’s Extended Fund Facility (EFF, 2024) and Resilience and Sustainability Facility (RSF, 2025), so-called “climate finance” has been tied to higher energy tariffs, subsidy removals, carbon levies on end consumers, and new taxes on renewables. These measures have deepened poverty, eroded social protection, and shrunk the fiscal space needed for genuine adaptation and just energy transitions.
ALC’s research and international advocacy show how the Fund’s surveillance regimes, policy conditionalities, and Debt Sustainability Analyses (DSAs) intensify debt stress while ignoring climate risk. Such frameworks misclassify highly vulnerable economies as “sustainable,” perpetuating cycles of borrowing that crowd out essential adaptation spending. Even after the 2022 floods displaced 33 million people, the IMF continued to deem Pakistan’s debt sustainable—disregarding the mounting costs of climate loss and the collapse of household welfare. Since entering successive IMF programs, Pakistan’s external debt servicing has risen by 45 percent, while climate investments were cut by more than half. In 2022 alone, the country spent eleven times more on debt repayments than on overall development.
Pakistan - Interest Payments and Development Spending as a Percentage of GDP (1981-2024)
ALC has also supported communities resisting the World Bank’s greenwashing agenda, from its Country Climate and Development Report (CCDR) to its “clean energy” lending pipeline that continues to fund destructive hydropower projects across the Himalayas. Mega-dams such as the 4,320 MW Dasu project and the Tarbela extensions are promoted as climate solutions but, in reality, destroy fragile mountain ecosystems, displace local communities, and degrade the Indus River system upon which millions depend.
Working closely with affected communities and international partners, ALC monitors these debt-creating climate offenders and publishes critical analyses of their lending operations and analytic toolkits. Our research has shown that IFIs operate with structural optimism bias, weak data, and a consistent disregard for ecological and social harm. Their frameworks lack harms assessments and fail to account for the welfare trade-offs imposed by austerity-driven “reforms.”
ALC calls for a debt-free and just climate transition for the Global South. We demand the cancellation of odious and climate-unjust debt, an end to debt-based climate finance, and the creation of grant-based mechanisms rooted in historical responsibility and reparative justice. Our submissions to international fora, including before the UN and the IMF’s board urges the Fund to embed social protection, welfare metrics, and climate-risk analytics into all Article IV consultations.
For ALC, confronting the IMF and World Bank is part of defending the fundamental right to a livable planet. True climate justice demands that global finance be held accountable to the people it claims to serve—not to the creditors it continues to protect.