Given Pakistan’s rising defense spending and worsening financial situation, India has strongly objected to the Asian Development Bank’s (ADB) recent approval of an aid package worth $800 million for Pakistan, expressing serious concerns about possible abuse of the money.
Pakistan’s military-dominated government has persisted in prioritizing defense spending over much-needed economic reforms and social development, even in the face of a severe economic crisis characterized by a declining tax-to-GDP ratio, depleted foreign exchange reserves, and skyrocketing double-digit inflation.
The increasing influence of Pakistan’s army over the nation’s economic policies is a major source of contention for India. With the army’s top brass now in charge, the Special Investment Facilitation Council (SIFC) has considerable power over economic choices, further excluding civilian oversight and raising the possibility of policy reversals and poor reform execution. It is believed that this long-standing military role undermines the accountability and transparency required for the efficient use of foreign aid.
Pakistan’s dismal performance in carrying out economic reforms that are required by multilateral organizations like the ADB and IMF adds to India’s concerns. The country’s repeated reliance on foreign bailouts—it recently applied for its 24th rescue package from the IMF—highlights the failure of earlier reform initiatives and the inability to establish long-term macroeconomic stability.
Indian officials have specifically issued a warning that the ADB funds may be used for defense, pointing to a spike in drone purchases after Operation Sindoor and recent purchases of fighter jets from China as proof of rising military spending.
India has also voiced concern about Pakistan’s ongoing policy of encouraging cross-border terrorism, which has made regional security issues worse. Islamabad has been criticized by New Delhi for its poor performance in carrying out the Financial Action Task Force (FATF) action points, especially those pertaining to the freezing and confiscation of criminal assets, the prosecution of leaders of UN-designated terrorist organizations, and investigations into terrorist financing.
Concerns about the Pakistani military’s hegemonic influence over economic policymaking, the possibility that aid will be diverted to defense rather than development, the nation’s persistent inability to carry out significant reforms, and the wider ramifications for regional security and stability are the main reasons India is opposing the ADB’s aid package.
