New Delhi: India has lodged a strong objection to the Asian Development Bank’s (ADB) recent approval of an 800-million-dollar funding program for Pakistan, expressing deep concerns over the potential misuse of funds.
New Delhi explicitly warned the ADB that the financial assistance risks being diverted from its developmental objectives, particularly in light of Islamabad’s increasing defence expenditure and weakening domestic resource mobilisation. India expects rigorous monitoring from the ADB to ensure the intended outcomes of the policy matrix are truly achieved, sources from the government said.
Senior Indian government sources pointed to a huge disparity between Pakistan’s escalating military budget and its plummeting tax-to-GDP ratio, which has declined from 13.0 per cent in FY2018 to a mere 9.2 per cent in FY2023, well below the Asia-Pacific average of 19 per cent.
India argues that externally provided fungible resources, such as policy-based loans, could indirectly enable increased military allocations, rather than addressing core economic and developmental needs.
The approved ADB package for Pakistan includes a 300 million dollar policy-based loan and a 500 million dollar program-based guarantee, designed to enhance fiscal sustainability and strengthen public financial management.
However, India underscored its scepticism regarding the effectiveness of previous international aid programs, noting that if such programs, including those from ADB and the IMF, had truly succeeded, Pakistan would not find itself approaching the IMF for its 24th bailout. This track record, India contended, casts serious doubt on the efficacy of past program designs, their monitoring, and implementation by Pakistani authorities.
Furthermore, India highlighted Pakistan’s poor track record of implementation, attributing it to the deeply entrenched interference of its military in economic affairs. This, according to Indian sources, poses significant risks of policy slippages and reversals of reforms that have been witnessed historically. New Delhi also cautioned that Pakistan’s inherent economic fragility presents considerable credit risks to the ADB itself.
These strong objections from India follow closely on the heels of a tense four-day military conflict between the two nuclear-armed neighbours in early May, triggered by a terror attack in Kashmir.
While India responded with cross-border strikes leading to intense clashes, a ceasefire was eventually declared on May 10. Just days later, Pakistan secured a fresh loan from the International Monetary Fund, despite India’s strong protests against the move, citing Islamabad’s rising military spending and stalled reforms as disqualifying factors.
