Pakistan defense budget surges
12% By Syed Fazl-e-Haider
KARACHI - A 12% rise in Pakistan's defense
budget for the fiscal year starting on July 1
outpaces the 8.1% increase in the national budget
announced last week, yet still hugely understates
actual military spending in the heavily indebted
country. The real amount is possibly nearly double
the budgeted figure.
A separate allocation
for security-related expenses and the amount given
over to pensions of military personnel have not
been included in the 495 billion rupees (US$5.76
billion) in budgeted defense expenditures. If
added, these bring total military and security
costs to 900 billion rupees.
servicing alone will consume 38% of the next
fiscal year's budget, with 1,034 billion rupees
earmarked for debt servicing and repayment of
foreign loans, compared with an original 699 billion
rupees, later revised to 726
billion rupees, in the 2010-11 budget.
scrutiny of defense spending has been demanded by
many in Pakistan, particularly following the May 2
Abbottabad assault in which American special
forces killed Osama bin Laden, the recent
terrorist attack on Mehran naval base in Karachi,
and the possible involvement of intelligence
operatives in the death of local Asia Times Online
bureau chief Syed Saleem Shahzad.
spending has been on rise at the expense of
development spending, leading to demands that the
national security paradigm shifts to social
concerns, with the bulk of the nation's resources
spent on education, health and other welfare
Finance Minister Abdul Hafeez
Shaikh on June 3 announced a 2,767 billion rupee
budget for the fiscal year ending June 31, 2012.
At a post-budget press conference the next day, he
called for checks and oversight on defense
expenditure, but also said that the government
would not compromise on the defense budget as it
was necessary for the security of the country.
Shaikh announced a 15% increase in the
salaries of federal government employees,
including the armed forces. At the same time, a
tax waiver on sales of defense stores was ended,
making defense trucks and other equipment and
parts subject to a 16% sales tax. Twenty similar
exemptions in other sectors of the economy were
Of the amount budgeted for
defense, which will consume 18% of the total
budget, 206.4 billion rupees is for
employee-related expenses, 128.2 billion rupees
for operating expenses, and 117.5 billion rupees
for physical assets.
The defense budget
masks actual defense expenditures in several ways.
Over and above the budget figure, 340 billion
rupees will be made available through grants for
security expenditure, up 19.3% from this year's
285 billion rupees. Total security-related
expenditures will increase 15% to 835 billion
rupees against this year's 727 billion rupees.
"The government has allocated an
additional 150 billion rupees for the armed
forces, almost half of which was billed under the
Armed Forces Development Programme," according to
The Express Tribune. The total defense and
security allocation comes to around 645 billion
rupees, which is almost 23.8% of the total budget.
In addition, 73.2 billion will be paid from
civilian accounts on army pensions - a practice
initiated by then president Pervez Musharraf in
2000. By adding the stated budget, contingent
liabilities and army pensions, allocations total
718 billion rupees, equivalent to almost 26% of
the total budget.
A year ago in its budget
for the 12 months to this June, the government
increased its defense spending 17% from the 342
billion rupees for the year to June 30, 2010.
Total defense and security-related spending in the
fiscal year was 586 billion rupees, or almost 23%
of the total budget. Adding pension-related
expenses of 71.9 billion rupees for the period,
total spending came in at 658 billion rupees, or
25.6% of the total budget.
establishment reportedly sought an 18% increase in
defense expenditure for the coming year, to 524
Post May 2, we live in a different
Pakistan. Osama bin Laden's presence here, the
American operation against him, the attack on
PNS Mehran, the possible involvement of
intelligence operatives in the death of
journalist Saleem Shahzad - all have taken place
within the space of a month. Pakistanis are
reeling from these shocks and increasingly
questioning the efficacy of the military. ...
the announcement of Rs495bn in defense
expenditure for 2011-12, a 12 per cent increase,
will raise concerns. A Rs295bn grant, most of
which will reportedly go to the military, has
also been made for security needs arising from
the new threats the country faces. Combined,
these two categories represent a third of next
year's budget, yet do not include some other
defense organizations such as the Frontier Corps
and the ISI.
Dawn's editorial added:
The defense budget far outpaces
health and education expenditure, for example,
in a country that offers little by way of social
services. It is obvious that Pakistan is at a
crossroads and that funds are required to defend
it at the expense of other needs. But its
citizens also need to know that those funds are
actually being spent on their
The country cut its
development spending by more than half in the
current fiscal year in order to meet its fiscal
deficit target. Critics say that the government
should cut its defense spending instead of
squeezing development funds.
dole out money any more without assessing the
actual needs and without setting benchmarks," The
Express Tribune reported defense analyst Ayesha
Siddiqa as saying. "It is high time to issue a
white paper on defense to assess what we have so
far got and what we lost and what are the actual
Nawaz Sharif, the leader
of Pakistan Muslim League-Nawaz (PML-N), the
country's main opposition party, recently demanded
that the budget of the army and intelligence
agencies should be presented in parliament.
"Intelligence agencies should stop playing
games, including making new political alliances
and dividing political parties. They should stop
running a parallel government and dictating [to]
elected representatives," The News reported Nawaz
Sharif as saying.
The budget set a total
tax collection target of 1.952 trillion rupees,
and a budget deficit target of 4% of gross
domestic product, or 851 billion rupees for the
coming fiscal year. The deficit is to be met
through local and external financing.
budget deficit is likely to reach 974 billion
rupees in 2011-12 if grants from foreign donors
are not received. Delivery of these is dependent
on a "letter of comfort" from the International
Monetary Fund. That hinges on Pakistan reaching
agreement with the Washington-based lender on
terms for the release of remaining funds linked to
a 2008 IMF bailout agreement. Islamabad also wants
new loans from the IMF to meet repayment
obligations tied to the earlier loan.
(http://www.syedfazlehaider.com) is a
development analyst in Pakistan. He is the author
of many books, including The Economic
Development of Balochistan (2004). He can be
contacted at[email protected]
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