India to push for international financial measures against Pakistan, source says

India will push the Financial Action Task Force (FATF), a global financial crime watchdog, to add arch-rival Pakistan back to its "grey list", and oppose upcoming World Bank funding to Islamabad, a top government source in New Delhi said on Friday.

India announced a slew of measures as retribution for what it says are Pakistan-backed militant attacks on its soil -- the latest of which killed 26 Hindu tourists in the Kashmir valley last month -- including keeping a critical water treaty in abeyance.

The source said India would not miss any opportunity "in opposing Pakistan and the next one is funding by World Bank, and we will raise our protest there too."

Pakistan's finance ministry did not immediately respond to a request for comment. Pakistan has denied any hand in the Kashmir attack and has said India's move of keeping the Indus Waters Treaty in abeyance is an act of war.

The nuclear-armed neighbours clashed in their worst military fighting in nearly three decades before agreeing to a ceasefire on May 10.

Pakistan was taken off the FATF grey list in 2022, giving it a clean bill of health on terrorist financing and boosting its reputation among lenders -- essential for Pakistan's crisis-hit economy.

The FATF's grey list places a country under increased monitoring until it has rectified identified flaws in its financial system.

The Indian government source alleged that Pakistan had not met the conditions for being taken off the grey list, and should therefore be returned to it.

India also told the IMF that arms purchases by Pakistan spiked every time it got a loan from the International Monetary Fund, the source said.

Reuters could not immediately verify the claims.

The FATF, the World Bank, and the IMF did not respond to requests for comment.

Pakistan secured a $7 billion bailout programme from the IMF last year, and a new $1.4 billion arrangement this month under a climate resilience fund.

At a press conference in Washington on Thursday, IMF director Julie Kozack said Pakistan had met all of its targets and made progress on reforms, leading the board to approve the programme last year.

Indian Prime Minister Narendra Modi said on Thursday that Pakistan, its army and its economy would "have to pay a heavy price for every terrorist attack".