India opposes ADB's $800 mn loan to Pakistan, warns of 'potential missue'

India has strongly opposed the Asian Development Bank’s (ADB) latest decision to provide $800 million to Pakistan.

New Delhi has reportedly argued that Islamabad’s increased military spending cannot be properly explained in terms of domestic resource mobilisation.

ADB on Tuesday approved an $800 million programme to strengthen fiscal sustainability and improve public financial management in Pakistan.

'Potential misuse of ADB resources'

According to multiple media reports, India has conveyed to ADB that it expects the bank’s management to ensure that funds it provides to Pakistan are not misused.

"India shared deep concerns regarding the potential misuse of ADB resources, particularly in light of Pakistan's increasing defence expenditure, its declining tax-to-GDP ratio, and the lack of demonstrable progress on key macroeconomic reforms," government sources said as quoted by PTI.

Also Read: Days after India's objection, IMF defends bailout package to Pakistan

Poor track record

Pakistan's poor track record of implementation stems from the military's deeply entrenched interference in economic affairs, posing risks of policy slippages and reversal of reforms as has been witnessed in the past, they said.

Even when a civilian government is in power, the army continues to play an outsized role in domestic politics and extends its tentacles deep into the economy, the sources added.

Also Read: IMF sets 11 new riders for Pak before release of next tranche of aid

Credit risk for ADB

The sources said that Pakistan's policy of cross-border terrorism has led to a worsening of the security situation in the region and has significantly escalated macroeconomic risks for that country, which also heightens the enterprise risks for the ADB.

India also highlighted that the economic fragility of the borrowing country (Pakistan) poses credit risks to the ADB, too, the sources added.

Also Read: India to ask global funding agencies to review loans, grants to Pak: Source

The backdrop

Khurram Schehzad, advisor to Pakistan's finance minister, said in a social media post that the package includes a $300 million policy-based loan (PBL) and a $500 million programme-based guarantee (PBG).

“ADB approves $800 million financing package for Pakistan under the Resource Mobilisation Reform Programme," he said.

Earlier, New Delhi had vehemently opposed the International Monetary Fund’s (IMF) decision to approve its latest bail-out to Pakistan. India had reportedly urged the IMF to stop providing additional funds to Pakistan and has reportedly decided to send a dossier to the Financial Action Task Force (FATF) to re-include Pakistan on the ‘grey list’ of countries that require greater supervision.

(With inputs from agencies)