$800 million in aid, but no reforms? India slams Pakistan’s spending priorities

New Delhi: India has raised strong objections regarding the potential misuse of an $800 million aid package granted to Pakistan by the Asian Development Bank (ADB). The concern stems from Islamabad’s decision to increase defence spending, despite the country’s poor fiscal health and deepening economic crisis.

Military's growing role in economic policy

Sources indicated that India is particularly concerned about the growing influence of the Pakistani military in economic affairs. The army now heads the Special Investment Facilitation Council, effectively giving it significant control over economic decision-making. India has cautioned that this entrenched military role increases the risk of sudden policy shifts and weak reform implementation.

Weak economy and rising defence spending

Pakistan is facing a severe economic downturn. The tax-to-GDP ratio has been falling, foreign exchange reserves have depleted, and inflation remains in double digits. Despite these issues, Pakistan continues to allocate more funds to defence, raising doubts about the effective use of international aid.

Poor reform record

India has further pointed out Pakistan’s unsatisfactory history of carrying out economic reforms, especially those required as part of aid programmes from multilateral institutions like the ADB. Officials have warned that there is a high risk the new funding could be diverted towards military expenditure instead of economic development.

Military hardware and IMF bailouts

Referring to recent defence purchases, including Chinese fighter jets and a large number of drones, Indian officials suggest these reflect Pakistan’s rising military expenditure. Additionally, Pakistan’s appeal to the International Monetary Fund (IMF) for a 24th bailout highlights ongoing policy failures and the inability of previous ADB and IMF-supported programmes to establish lasting macroeconomic stability.

Security and terrorism concerns

India has also expressed concern over Pakistan’s continued support for cross-border terrorism, which has destabilised regional security. It further highlighted Islamabad’s poor track record in implementing Financial Action Task Force (FATF) recommendations, particularly those related to investigating and prosecuting terrorist financing, as well as freezing and confiscating criminal assets.

IANS inputs