India has expressed significant concerns regarding the recent decision by the Asian Development Bank (ADB) to approve an $800 million financial support package for Pakistan. Indian officials argue that such funding risks being misused in light of Pakistan’s ongoing involvement in cross-border terrorism and a history of seeking economic bailouts.
Government sources disclosed that India communicated its objections to the ADB, highlighting Pakistan’s noncompliance with the Financial Action Task Force (FATF) mandates. A key point of contention is Pakistan’s failure to freeze the assets of groups designated as terrorists by the United Nations. Moreover, India emphasized that the regional security environment in South Asia is compromised by Pakistan’s support for terrorism, citing a recent terror attack in Pahalgam as a stark reminder of this threat.
The ADB’s financial support aims to bolster Pakistan’s fiscal sustainability and enhance public financial management through what is termed the “Improved Resource Mobilisation and Utilisation Reform Program Subprogram 2.” This package includes a $300 million policy-based loan along with a $500 million guarantee, designed to help mobilize an additional $1 billion in commercial financing.
India contended that Pakistan’s ongoing reliance on International Monetary Fund (IMF) bailouts highlights a systemic failure to implement necessary economic reforms. It pointed out a worrying trend in Pakistan’s economic indicators, specifically noting the decline in the country’s tax-to-GDP ratio from 13% in 2018 to 9.2% in 2023, all while defense spending continued to rise.
Furthermore, Indian sources criticized Pakistan’s governance structure, particularly the significant influence of the military in civilian economic policymaking. They cited the Special Investment Facilitation Council (SIFC), established in June 2023, as a mechanism that allegedly grants excessive control to the military over economic initiatives aimed at promoting foreign direct investment.
In light of these concerns, India called on the ADB and other international financial institutions to reevaluate future aid packages directed at Pakistan, emphasizing that such support should be conditional upon tangible reforms and an end to Islamabad’s covert support for terrorism. This stance aligns with India’s broader diplomatic strategy of scrutinizing international financial assistance to nations it believes jeopardize regional peace and security.
Despite India’s objections, the ADB maintains that the funding is intended to assist Pakistan in reforming its tax system, enhancing digital infrastructure, improving the investment climate, and ensuring fiscal discipline to achieve long-term macroeconomic stability.
