India opposes ADB's $800 mn funding to Pakistan; cites cross-border terror, repeated IMF bailouts

India has raised serious objections to the Asian Development Bank's (ADB's) $800 million bailout package for Pakistan. ADB on Tuesday approved an $800 million program to strengthen fiscal sustainability and enhance public financial management in Pakistan.

India flagged cross-border terrorism as a massive risk to Pakistan's macroeconomic and security situation going forward, government sources told Business Today TV. It also cited Pakistan's failure to act on the key mandates of the Financial Action Task Force (FATF), which includes freezing assets of UN-designated terrorist groups. 

As per sources, India told the ADB that repeated International Monetary Fund (IMF) bailouts are an indication of failed economic reforms in Pakistan. 

After the Pahalgam terror attack, India has exposed Pakistan's tacit support for terrorism at global lending bodies and urged them to pause future funds and packages.

As per the sources, New Delhi cited serious concerns of the misuse of funds, citing Islamabad's rising defence spend amid the falling tax-GDP ratio. Pakistan’s tax-GDP fell from 13% (2018) to 9.2% (2023), and the country's defence spending went up during this period. 

New Delhi further flagged Pakistan's weak governance and the oversized role of its Army in economic affairs. Government sources mentioned that India stated the Pakistan Army's influence remains strong, especially via the Special Investment Facilitation Council (SIFC).

The Special Investment Facilitation Council (SIFC) was set up in June 2023 to promote and facilitate investment, especially foreign direct investment (FDI).  

About ADB's bailout package to Pakistan

The ADB has granted the bailout package to Pakistan under the Improved Resource Mobilisation and Utilisation Reform Program Subprogram 2.

The package includes a policy-based loan of $300 million and ADB's first-ever policy-based guarantee of up to $500 million, expected to mobilise financing of up to $1 billion from commercial banks. 

The program aims to improve tax policy, public expenditure, digitalisation, investment facilitation, and private sector development in Pakistan, reducing fiscal deficit and public debt, and fostering long-term fiscal stability.