India opposed to ADB’s funding to Pakistan

Why in the News?

India has strongly objected to the Asian Development Bank’s (ADB) decision to provide an $800 million loan to Pakistan under its Resource Mobilisation Reform Programme.

About the Asian Development Bank (ADB):

• Established: 1966, following a UN-led conference on Asian Economic Cooperation.
• Headquarters: Manila, Philippines
• Status: Official Observer at the United Nations
• Objectives:
  • To reduce poverty in Asia and the Pacific.
  • To promote inclusive and environmentally sustainable growth and regional economic integration.
• Functions:
  • Provides loans (hard and soft), grants, and technical assistance.
  • Offers direct funding to private sector projects with social benefits.
  • Supports countries through policy dialogues, co-financing, and advisory services.
• Funding Sources:
  • Issues bonds on global capital markets.
  • Receives member contributions, loan repayments, and retained earnings.
• Membership and Shareholding:
  • 67 members: 48 from Asia-Pacific.
  • Major shareholders: Japan and USA (each 15.607%), China (6.444%), India (6.331%), Australia (5.786%).
• Climate Goals:
  • Aims to mobilize $100 billion for climate finance between 2019 and 2030.
  • Promotes sustainable development initiatives such as green fuel projects, including one in Pakistan funded partly by ADB.

India’s concerns over ADB Funding:

• India emphasized that Pakistan’s defense spending has risen significantly even as its tax-to-GDP ratio fell from 13% in 2017-18 to 9.2% in 2022-23.
• This tax ratio is significantly below the Asia-Pacific average of 19%, suggesting poor revenue collection and financial mismanagement.
• India stressed to ADB that it expects strict oversight mechanisms to be implemented to avoid diversion of funds.
• India has previously opposed financial aid to Pakistan at other fora like the International Monetary Fund (IMF) and is reportedly preparing a dossier to request Pakistan’s re-entry into the FATF grey list.