India Strongly Opposes ADB's $800-Million Support To Pakistan, Demands Close Monitoring
India has objected to the Asian Development Bank's funding support for Pakistan, citing concerns over potential misuse due to its rising defence spending and falling tax-GDP ratio.
India has strongly objected to the Asian Development Bank's (ADB) recent approval of an $800-million funding programme for Pakistan, raising serious concerns about the potential misuse of funds, especially in the backdrop of Islamabad's rising defence expenditure and weakening domestic resource mobilisation. The country expects the ADB to closely monitor the implementation of the policy matrix to achieve the intended outcomes.
According to senior Indian government sources, New Delhi cautioned the ADB that its financing could be diverted away from developmental objectives. India pointed to a clear mismatch between Pakistan's growing defence spending and its declining tax-to-GDP ratio, suggesting that externally provided fungible resources — such as policy-based loans — might be indirectly enabling increased military allocations.
India highlighted that Pakistan's tax-to-GDP ratio has dropped from 13.0% in FY2018 to 9.2% in FY2023, far below the Asia-Pacific average of 19%. Despite this decline in domestic revenue generation, the country has significantly ramped up defence spending over the same period, raising red flags about the direction of its fiscal priorities, they said.
The ADB on June 3 approved the Improved Resource Mobilization and Utilization Reform Program – Subprogram 2 to 'boost Pakistan's public finance". It includes a policy-based loan of $300 million, and ADB's first ever policy-based guarantee of up to $500 million, which is expected to mobilise financing of up to $1 billion from commercial banks.
'India cautioned the ADB regarding the possibility of misuse of its resources. The linkage between Pakistan's increase in expenditure on its military, as opposed to on development, cannot be fully explained solely in terms of its domestic resource mobilisation," one of the sources said.
'Such a track record calls into question both, the effectiveness of the program designs, their monitoring and their implementation by the authorities," they added.
Pakistan's poor track record of implementation stems from the military's deeply entrenched interference in economic affairs, posing risks of policy slippages and reversal of reforms as has been witnessed in the past, according to the highly placed government sources.
'Even when a civilian government is in power now, the army continues to play an outsised role in domestic politics and extends its tentacles deep into the economy," they said.
'New Delhi Demands Closely Monitoring'
'India expects the ADB to closely monitor the implementation of the policy matrix to achieve the intended outcomes," the sources said.
India also highlighted that the economic fragility of the borrowing country (Pakistan) poses credit risks to the ADB too. Pakistan's continued reliance on external debt raises concerns about the long-term sustainability of future exposures, especially in view of the high debt-to-GDP ratio and poor credit rating of the country. Therefore, India urged ADB to be vigilant to safeguard the bank's financial health and long-term prospects, they said.
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June 04, 2025, 15:14 IST
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