Pakistan gets USD 800 million package from Asian Development Bank, India strongly opposes
The development comes a month after Pakistan secured a $1 billion (around Rs 8,500 crore) package from the International Monetary Fund (IMF).
The Asian Development Bank (ADB) has approved a financial package of USD 800 million for Pakistan aimed at enhancing fiscal sustainability and strengthening public financial management. Khurram Schehzad, advisor to the finance minister, confirmed the development via a brief statement on social media.
He said that the package includes a USD 300 million policy-based loan (PBL) and a USD 500 million programme-based guarantee (PBG).
ADB approves USD 800 million package for Pakistan
He said, "ADB approves USD 800 million financing package for Pakistan under the Resource Mobilisation Reform Programme (Subprogram-II) -- $300M PBL + $500M PBG. Diplomacy led by Economic Affairs & Ministry of Finance secures majority support at ADB Board."
In a separate statement, the Philippines-based lender also confirmed the development, noting that the support falls under subprogramme 2 of the "Improved Resource Mobilisation and Utilisation Reform Programme."
The package includes a policy-based loan of USD 300 million and ADB's first-ever policy-based guarantee of up to USD 500 million. The bank added that this guarantee is expected to mobilise additional financing of up to USD 1 billion from commercial banks, further boosting Pakistan’s access to external funds and helping stabilize its economy.
"Pakistan has made significant progress in improving macroeconomic conditions," said ADB country director for Pakistan, Emma Fan.
"This programme backs the government's commitment to further policy and institutional reforms that will strengthen public finances and promote sustainable growth. The programme supports far-reaching reforms to improve tax policy, administration, and compliance while enhancing public expenditure and cash management.
"It also promotes digitalisation, investment facilitation, and private sector development. These measures aim to reduce Pakistan's fiscal deficit and public debt while creating space for social and development spending," it said.
India strongly opposes ADB financing to Pakistan
India has vehemently opposed any Asian Development Bank financing support to Pakistan, raising serious concerns about potential misuse of development funds for military expenditure and questioning Pakistan's commitment to economic reforms. According to the news agency ANI sources, India expressed deep reservations to the ADB about Pakistan's deteriorating fiscal performance, declining tax collection, and suspected diversion of international development funds toward defence spending rather than development priorities.
India highlighted Pakistan's alarming fiscal trends as evidence of misplaced priorities. Pakistan's tax collection as a share of GDP plummeted from 13.0% in FY2018 to just 9.2% in FY2023 - far below the Asia-Pacific average of 19.0%. Despite this revenue decline, Pakistan significantly increased defence expenditure during the same period.
"The linkage between Pakistan's increase in expenditure on its military, as opposed to development, cannot be fully explained solely in terms of its domestic resource mobilisation," sources told ANI.
India warned that this pattern suggests possible diversion of funds from international financial institutions, particularly through fungible debt financing instruments like Policy-Based Loans.
India urged ADB management to adequately ring-fence financing to prevent such misuse of development resources.
India questioned the effectiveness of previous ADB and IMF programs, noting that Pakistan has approached the International Monetary Fund for its 24th bailout program despite years of institutional support. This track record, India argued, calls into question both program design and implementation by Pakistani authorities.
IMF has approved USD 1 billion loan for Pakistan
Earlier in May, IMF had approved the immediate disbursement of approximately USD 1 billion to Pakistan under the ongoing Extended Fund Facility (EFF) program. The decision followed the Washington-based lender’s review of Pakistan’s economic reform progress, bringing total disbursements under the EFF arrangement to about USD 2.1 billion.
The IMF’s approval marks the first installment under the current three-year, USD 7 billion EFF arrangement, which was originally agreed upon in July last year. The program aims to stabilize Pakistan’s struggling economy through structural reforms, including tax policy adjustments, energy sector reforms, and measures to improve private sector growth.
However, India has repeatedly expressed concerns that the financial aid could indirectly support hostile military activities, given Pakistan’s history of using international funds to finance proxy groups involved in cross-border violence.
(With agencies input)
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