Saturday, 4 June 2011

Pakistan Raises Defense Budget by 12%, But where is the money?

The Pakistan Government has hiked the defense allocation by about 12 per cent to Rs495 billion for 2011-12. According to budget documents, the allocation for the next fiscal year is Rs53 billion more than the Rs442 million originally earmarked for last year.

Finance Minister Abdul Hafeez Shaikh said in his budget speech: “We live in a difficult neighbourhood. We are faced with threats to our security. We remain engaged in a struggle for the safety of our citizens. We are the victims of war on terrorism.”

After the announced increase, Pakistan, according to the Stockholm International Peace Research Institute’s database of military expenditure, would rank among the top 30 spenders on defence.

During the current financial year the military expenses overshot the allocation by about Rs25 billion.

Seen in real terms, the defence budget has reduced marginally because of inflation, which averaged 14.1 per cent, a 15 per cent raise in salaries and pensions of troops and increase in fuel prices.

Earlier reports had suggested that military had sought an allocation of over Rs500 billion, but the government could not do it because of the financial crunch and poor economic growth.

The finance minister rejected doubts being raised about the competence of the military in the wake of recent incidents, saying it had rendered sacrifices in the fight against militancy."We stand by our valiant men, who are laying down their lives to safeguard our country," finance minister Abdul Hafeez Shaikh told parliament. "The country has constantly been suffering because of the existing security situation," but the government was determined to improve the economy and provide security to the people, he said.

Details about defence spending were as usual scant and broadly categorised under heads like employee expenses (Rs206.5 billion), operating expenditures (Rs128.3 billion), physical assets (Rs117.6 billion) and civil works (Rs42.6 billion).

Traditionally, budget documents mention a single-line defence allocation with no breakdown. In the absence of detailed information on military spending it is not clear if allocated funds are used for specified purposes or are subsequently re-appropriated.

The total budget for the next year was fixed at 2,504 billion rupees ($29.1 billion), with a budget deficit of 850 billion rupees ($9.9 billion), or four percent of gross domestic product (GDP), Shaikh said.

Shaikh said Pakistani exports grew by 28 percent, an unprecedented rate, during the current fiscal year. "We also hope that our remittances will reach a level of $12 billion by close of this year," he said, adding: "Our foreign currency reserves have reached $17.3 billion.". He said that the government had achieved some macrostability, checked inflation and begun to impact the growth rate.