India expressed “serious reservations” regarding the $800 million loan that ADB provided to Pakistan.

India expressed "serious reservations" regarding the $800 million loan that ADB provided to Pakistan. India expressed "serious reservations" regarding the $800 million loan that ADB provided to Pakistan.

India had expressed “profound apprehensions” regarding the potential misappropriation of funds by Pakistan to the Asian Development Bank (ADB) in anticipation of the extension of a $800 million tranche to the neighboring country. According to government sources, India had “vehemently opposed” the ADB’s provision of “any form of financing support” to Pakistan, particularly in light of Pakistan’s declining tax-to-GDP ratio, its increasing defense expenditure, and the absence of demonstrable progress on critical macroeconomic reforms.

“India issued a warning to the ADB regarding the potential for resource misappropriation.” The relationship between Pakistan’s increase in military expenditure and its decrease in development expenditure cannot be completely accounted for solely in terms of its domestic resource mobilization. India emphasized that Pakistan’s tax collection as a percentage of GDP decreased from 13.0% in FY18 to 9.2% in FY23 and continues to be significantly lower than the Asia and Pacific average of approximately 19.0%. Nevertheless, there has been a substantial increase in defense expenditure during the same period, according to a source.

On Tuesday, the Asian Development Bank (ADB) approved a $800 million program to enhance public financial administration and enhance fiscal sustainability in Pakistan. Prime Minister Narendra Modi met with ADB President Masato Kanda on June 1, according to a post on X by the Congress earlier in the day. Three days later, the ADB approved the $800-million loan to Pakistan. Pakistan has received Rs 6,861 crore from the Asian Development Bank (ADB). Narendra Modi conferred with Masato Kanda, the President of the Asian Development Bank, just three days ago. Subsequently, Pakistan received a substantial sum. The Modi government’s influence on the IMF was unsuccessful in the past, and Pakistan was able to secure the loan. The pose by Congress also stated that this occurred during the conflict between India and Pakistan.

According to government sources, India anticipates that the ADB management will implement a sufficient ring-fence to safeguard the ADB’s financing from any potential misuse. “The military’s deeply entrenched interference in economic affairs is the root cause of Pakistan’s poor track record of implementation, which has resulted in policy slippages and the reversal of reforms in the past,” the source stated.

According to sources, the army maintains an extensive presence in domestic politics and extends its influence into the economy, even when a civilian government is in power. “The security situation in the region has deteriorated as a result of Pakistan’s policy of cross-border terrorism, which has also significantly increased macroeconomic risks for the country. This has also increased the enterprise risks for the ADB,” the source stated.

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