India Raises Concerns Over ADB’s Financial Aid to Pakistan

Worries About Fund Misuse and Military Spending

India has voiced strong concerns about the Asian Development Bank’s (ADB) plan to give financial aid to Pakistan. India worries that Pakistan might use these funds for military purposes instead of economic development. Also, India questions Pakistan’s dedication to real economic reforms.

India’s Main Concerns

• Fiscal Performance: India noted that Pakistan’s fiscal performance and tax revenues are going down. Tax collection fell from 13% of GDP in FY2018 to just 9.2% in FY2023.
• Military Spending: Even with lower tax revenues, Pakistan has increased its defense spending. India suspects that international funds might be used for military purposes.
• Past Programs’ Success: India questioned how well previous multilateral programs worked. Pakistan is now seeking a record 24th bailout from the International Monetary Fund (IMF).

India’s Suggestions

India has asked the ADB to put safeguards in place. These measures would help stop development funds from being used for non-developmental purposes, especially military spending.

Governance and Security Issues

• Military’s Role: India is concerned about the military’s big role in Pakistan’s economy. This influence is seen as a hurdle to lasting reform.
• FATF Duties: Pakistan has not met important Financial Action Task Force (FATF) duties. These include prosecuting UN-designated terrorist leaders and stopping terror financing.
• Regional Stability: India pointed out Pakistan’s negative impact on the region. The policy of cross-border terrorism harms regional security and increases economic risks.

Financial Risks for ADB

India also shared worries about ADB’s financial exposure to Pakistan. Given Pakistan’s poor credit rating and high debt-to-GDP ratio, India urged ADB to be careful. This caution is needed to protect the bank’s financial health and long-term future.

Conclusion

The ADB has not yet replied to India’s concerns. However, these issues could make it harder for Pakistan to get new development funding. This situation comes at a time when Pakistan’s economic weaknesses are under close global watch.