In short :
India has vehemently opposed the Asian Development Bank’s (ADB) decision to grant $800 million to Pakistan under its Resource Mobilisation Reform Programme, raising concerns over possible misuse for military expenditure instead of development.
India’s Concerns :
- Increased Defence Spending: India flagged Pakistan’s rising military expenditure despite falling development investment.
- Declining Tax-to-GDP Ratio: Pakistan’s tax collection fell from 13% (2017–18) to 9.2% (2022–23), far below the Asia-Pacific average (~19%).
- Misuse Risk: India asked ADB to ring-fence the funding to avoid diversion toward military or non-developmental ends.
- Governance Issues: Cited Pakistan’s poor compliance with Financial Action Task Force (FATF) mandates—especially regarding terror financing and criminal asset seizure.
Geopolitical and Strategic Angle
- India has consistently lobbied against international aid to Pakistan at forums like IMF and FATF, arguing that funds are indirectly enabling terror networks and hostile postures.
- India plans to submit a dossier to FATF for possible re-inclusion of Pakistan in the ‘grey list’.
ASIAN DEVELOPMENT BANK
Established: 19th December 1966
Headquarters: Manila, Philippines
Mandate: To promote a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while eradicating extreme poverty.
India’s Position
- India ranks 1st in financial commitments among developing member countries.
- Followed by: China, Bangladesh, the Philippines, and Pakistan.
Core Functions
- Development Assistance: Provides grants, loans, technical assistance, and equity investments to member countries, private sectors, and PPPs.
- Policy & Advisory Support: Facilitates policy dialogues, advisory services, and co-financing (official/commercial/export credit sources).
- Focus Areas (aligned with SDGs): Education, Health, Transport, Energy, Finance, Climate Change
- Partnerships: Works with NGOs and private sector to strengthen capital markets and infrastructure in developing nations.
Membership Details
Eligibility:
- Members of UN Economic Commission for Asia and the Far East
- UN members or members of UN specialized agencies (regional and non-regional)
Total Members (as of now): 69
Regional Members: 49 (e.g., India, China, Japan, South Korea, Australia)
Non-Regional Members: 20 (e.g., U.S., UK, France, Germany)
Governance Structure
- Elects 12-member Board of Directors.
Board of Governors:
Board of Directors:
- 8 from Asia-Pacific
- 4 from non-regional members
President:
- Elected by the Board of Governors for 5 years
- Traditionally from Japan (as Japan is the largest shareholder and founder)
Voting Power
- Model: Similar to the World Bank—weighted voting system based on capital subscription.
- Top 5 Shareholders: Japan: 15.6%, United States: 15.6%, China: 6.4%, India: 6.3%, Australia: 5.8%
Funding Sources
- International Bond Markets: Regular capital raising.
- Other Sources: Member contributions, Retained earnings from lending operations, Loan repayments
UPSC Relevance :
GS2 – International Institutions & IR
Role of multilateral financial institutions (ADB, IMF, FATF), India’s diplomatic efforts to influence global funding norms to counter cross-border terrorism, Importance of fiscal responsibility and transparency in international borrowing.
Mains Question (Practice)
“Multilateral funding institutions must balance economic support with geopolitical responsibility. Critically analyse in the context of India’s concerns over ADB loans to Pakistan.”