The Asian Development Bank (ADB) has approved an $800 million loan package for Pakistan to help improve its tax system and secure commercial loans, even though India objected to the move.
India had urged the ADB to stop the loan, but the bank said it would stay neutral and not get involved in political disputes. The ADB said that as a founding member, Pakistan has the right to receive loans if it meets all the required conditions.
What the Loan Will Be Used For:
- $300 million will go toward improving tax collection and government spending in Pakistan.
- $500 million will be used as a guarantee to help Pakistan get up to $1 billion from commercial banks, even with its low credit rating.
This decision comes after India recently tried—and failed—to block loans to Pakistan at both the International Monetary Fund (IMF) and now at the ADB. Indian representatives raised concerns about Pakistan’s high debt levels and the risk that the funds might be misused. Pakistan responded by pointing out that India’s debt is actually higher, and that questioning ADB’s loan use would be like doubting the bank’s own management.
Pakistan also accused India of funding terrorism in regions like Balochistan and Khyber Pakhtunkhwa, while defending its military strength by saying it shot down six Indian jets, including Rafales, during a recent conflict.
ADB’s Stand and Pakistan’s Economic Goals:
The ADB said that Pakistan had met all conditions for the loan and praised its progress in improving its economy. The loan will help Pakistan:
- Strengthen tax policies
- Improve spending efficiency
- Promote digital and private sector growth
- Build long-term financial stability
Pakistan is currently trying to increase its foreign exchange reserves from $11.5 billion to over $14 billion by the end of June. The $800 million loan is not for development projects, but to stabilize the economy and build financial reserves.
Read More: IMF Defends Pakistan Loan Days After India Calls Out Terror Funding
Despite a recent credit rating upgrade by Fitch, Pakistan’s rating remains low (B-Negative). That’s why it is using the ADB guarantee to attract more commercial loans at better terms.
