Daijiworld Media Network – New Delhi
New Delhi, Jun 4: India has raised strong objections to the Asian Development Bank’s (ADB) recent approval of an $800 million loan package to Pakistan, citing serious concerns over the potential misuse of international financial resources, particularly given Islamabad’s soaring defence budget and weak macroeconomic fundamentals.
The opposition comes nearly a month after India expressed displeasure over the International Monetary Fund’s (IMF) $2.3 billion bailout to Pakistan, despite stringent conditions aimed at preventing fund diversion.
According to a PTI report from Islamabad, the ADB’s financial aid includes a $300 million policy-based loan and a $500 million programme-based guarantee. The funds are intended to improve Pakistan’s fiscal sustainability and public financial management.
However, Indian officials, speaking on condition of anonymity, said Pakistan’s declining tax-to-GDP ratio which dropped from 13% in FY2018 to just 9.2% in FY2023 and its simultaneous rise in defence spending raise red flags about how foreign loans are being utilized. India pointed out that while the average tax-to-GDP ratio in Asia-Pacific stands around 19%, Pakistan lags far behind, reflecting poor domestic resource mobilisation.
“The diversion of resources from development to military expenditure cannot be justified solely by internal fiscal constraints,” said one official, urging the ADB to “ring-fence” its financing to prevent potential misuse.
New Delhi questioned ADB’s rationale for the loan, stating that if previous financial support from the ADB and IMF had truly succeeded in fostering macroeconomic reform, Pakistan wouldn’t be seeking its 24th bailout.
India also voiced concerns about the lack of reform implementation and monitoring in Pakistan, blaming the country's military-dominated governance system. "Even under a civilian administration, the army continues to wield significant control over the economy, including a lead role in the Special Investment Facilitation Council," an official said.
Highlighting the broader regional implications, India accused Pakistan’s governance model of threatening regional peace through its continued policy of cross-border terrorism, which not only escalates regional insecurity but also worsens macroeconomic risks.
India further warned the ADB of growing credit risks due to Pakistan’s high debt-to-GDP ratio, poor credit rating, and continued reliance on external borrowing. “Such economic fragility poses long-term risks to the ADB’s financial stability,” the official added.
New Delhi urged the ADB to rigorously monitor the implementation of the loan’s policy matrix to ensure accountability and tangible reform outcomes.