India has raised significant concerns regarding the Asian Development Bank's (ADB) recent approval of an $800 million aid package to Pakistan. The objections are based on apprehensions about potential misuse of funds, Pakistan's increasing defense expenditure, a declining tax-to-GDP ratio, and the country's slow progress on macroeconomic reforms. Government sources indicate that India has cautioned the ADB about these risks, urging the bank to implement strict oversight measures to ensure the funds are used for their intended purpose.

India's primary concern revolves around the potential diversion of funds towards defense spending rather than development projects. It has highlighted the growing disconnect between Pakistan's rising military expenditure and its poor domestic resource mobilization. India has pointed out that Pakistan's tax-to-GDP ratio has fallen from 13.0% in fiscal year 2018 to 9.2% in fiscal year 2023, which is significantly below the Asia-Pacific average. At the same time, there has been a substantial increase in defense spending raising the possibility that funds made available to Pakistan by external agencies may be diverted toward defense purposes. India has requested the ADB to ring-fence its financing to prevent any such misuse.

Another key point of contention is the effectiveness of previous reform programs supported by the ADB and the International Monetary Fund (IMF). India has questioned why Pakistan is seeking its 24th bailout from the IMF if these programs had successfully established a sound macroeconomic framework. This, according to India, reflects poorly on the design, implementation, and monitoring of these programs. India has suggested that the implementation of reforms in Pakistan has been largely driven by external support, undermining local ownership and perpetuating a cycle of dependency.

Furthermore, India has warned the ADB about the credit risks associated with Pakistan's economic fragility. Concerns have been raised about Pakistan's reliance on external debt, high debt-to-GDP ratio, and poor credit rating, arguing that these factors threaten the long-term sustainability of ADB's financial exposure. India has urged the ADB to remain vigilant in safeguarding the bank's financial health and closely monitor policy implementation to ensure the intended outcomes are achieved.

India also voiced concerns about the lack of reform implementation and monitoring in Pakistan, blaming the country's military-dominated governance system. India has pointed out that even under a civilian administration, the army continues to wield significant control over the economy, deepening its economic involvement and posing serious risks of policy reversal and poor reform implementation. India also accused Pakistan's governance model of threatening regional peace through its continued policy of cross-border terrorism, which not only escalates regional insecurity but also worsens macroeconomic risks.