Asian Development Bank approves loan to Pakistan despite India's strong opposition

India has strongly opposed the ADB's loans to Pakistan, pointing to issues with governance, high defence spending, inadequate reforms and cross-border terrorism.

Asian Development Bank approves loan to Pakistan despite India's strong opposition

New Delhi (India) June 5: The Asian Development Bank (ADB) has authorised a USD 800 million loan to improve Pakistan's public financial management and increase fiscal sustainability.

India has opposed the Asian Development Bank's (ADB) proposal to lend Pakistan $800 million and warned the bank of potential credit risks. India has presented proof of Islamabad misusing development funding for military purposes.

India expressed serious worries about the possible abuse of ADB funds, especially in view of Pakistan's rising defence spending, falling tax-to-GDP ratio, and the absence of apparent advancements on important macroeconomic reforms.

According to sources, “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. India highlighted that Pakistan’s tax collection as a share of GDP declined from 13.0% in FY18 to 9.2% in FY23 and continues to remain way lower than the Asia and Pacific average of about 19.0%. However, there has been a significant increase in defence spending in the same period.”

The controversial funding plan was accepted by the ADB in spite of India's warnings about the abuse of funds and Pakistan's decreasing debt-to-GDP ratio.

India expressed "deep concerns" to the Asian Development Bank (ADB) on the potential for Pakistan to misuse funds. 

According to government sources, India "vehemently opposed" the ADB providing "any form of financing support" to Pakistan after the rising defence spending of the nation. 

After Operation Sindoor, this is the second time when Pakistan has received funding in spite of India's strong opposition. The International Monetary Fund (IMF) has already authorised a loan of approximately $1 billion which was given on May 9 under the Extended Fund Facility (EFF) arrangement. It has also authorised a loan providing access to roughly $1.4 billion under the Resilience and Sustainability Facility (RSF).

Aadrika Tayal