Pakistan Defence Budget 2010-2011

Pakistan’s national budget for the year 2010-2011 announced recently has been set at Rs 3,259 billion (all figures Pakistan rupees). The allocation for defence for the fiscal year 2010-2011 (starting July 1) stands at Rs 442.2 billion ($5.2 billion), an increase of approximately 17 per cent over the previous year. Pakistan has increased the defence budget by approximately Rs 64 billion which according to Pakistan was considered as “must” given the intensified battle against terrorism within Pakistan.

According to available details, the defence administration has been allocated Rs 1.427 billion against Rs 1.289 billion in 2009-2010. The share of defence forces will be Rs 440.746 billion, as compared to Rs 376.846 billion in the previous fiscal year. The salaries of the defence personnel have been hiked and out of the total budget of Rs 442.2 billion, Rs 176 billion has been allocated for salaries and other benefits of defence personnel. Operational expenditures which stood at approximately Rs 97.5 billion last year, have been increased to Rs 111.24 billion rupees.

Various daily reports suggest that the Federal Budget 2010-2011 has many economists and scholars questioning the raise in defence spending, despite Pakistan’s economic crunch which has witnessed high inflation in the last two years directly influencing the cost of living in Pakistan. This debate regarding high defence spending being held responsible directly or indirectly for the nation’s economic woes in not new in Pakistan. It has been nearly two decades that Pakistan has had strong voices criticising high allocation to the defence sector, which has invariably denied the allocation of funds to the development sectors. Even in the 1990s, the economically worst hit decade, the defence spending was maintained at high level of 5 per cent of GDP.

Pakistan spends more on defence as a percentage of GDP as compared to India and many other militarily stronger nations, like United Kingdom, China, France, etc. Pakistan’s over-powering military has consistently used the argument of Indian conventional military superiority and Indian defence spending, for budgeting vast amounts for the defence sector. This totally ignores India’s total defence commitments which are much larger than Pakistan’s. This year India’s defence expenditure has been increased by 8.13 per cent from the revised estimates of the previous fiscal year. As always, this generated ample hue and cry amongst Pakistani ruling elites. But, Pakistan needs to realise that India is a much larger country with over 16,000 km land frontier and 7,600 km long coastline which has also become a live border after 26/11. Some of this increase has also been due to the real effective appreciation of the Indian rupee against the dollar. More importantly, undoubtedly India faces larger security challenges as compared to any of its neighbours.

While announcing the defence budget, the newly inducted Finance Minister, Adbul Hafeez Sheikh said, “The security situation has not been totally brought under control in spite of the recent gains. In the last three years more than 3,400 people have been killed across Pakistan in bomb blasts and suicide attacks blamed on Taliban militants” – the Taliban that the Pakistan Army created and nurtured for two decades. No doubt, Pakistan is passing through the most difficult and challenging period with the ghastly terror attacks covering the entire country. Pakistan’s concerns for its stability are very genuine and thus prioritising defence is not surprising. But the nation has also received significant military aid (not shown in the defence budget) and economic aid (over 60 per cent of which has been spent on military assets) during the last eight years not only from the US but various other sources. Pakistan has received close to $18.5 billion as direct overt US aid and military reimbursements between FY2002-FY2010. As may have been noticed, US assistance to Pakistan has grown rapidly post 9/11. The Foreign Military Financing (used by Pakistan for funding US equipment) went up to $300 million in 2009 alone. Taking into account the figures for FY 2002-FY 2010 (includes estimated figures for 2010) the total security assistance including the FMF, IMET, NADR, CSF amounts to $12.5 billion. Nearly 53 per cent of US aid to Pakistan has been for the direct reimbursements towards costs of Pakistan’s military activities along the Afghan border through the CSF programme. In addition to these are excess defence articles which Pakistan receives as a non-NATO ally from the United States. Thus, the US assistance and the excess defence articles alone amount to approximately 14.5 per cent (if not more!) of the Pakistan defence budget. Pakistan’s actual spending on defence is much more than projected in the official budget.

Pakistan’s economy has failed to attain self-sustainability despite the foreign aid pouring in at an increasing rate. Pakistan projects low figures as compared to other developing nations with the similar per capita income, even though there have been efforts to channelise the investment into social sectors. Pakistan has failed to invest in its ‘human capital’ which is the root cause for most of its troubles today. Pakistan’s spending on education rose from 1.7 per cent of GDP in 2001-2002 to 2.4 per cent in 2006-2007, it still spends less on education in terms of GDP than India (3.8 per cent) or even Bangladesh (2.4 per cent). The important social sectors like education and health have been deprived for decades in Pakistan leading lower growth rates and violence in the civil society. 

The biggest challenge for Pakistan lies within its own system, failure of its ruling elites to identify true assets and invest in human resources. The key for Pakistan is not an increase in the open-ended defence allocations, but better and more rational utilisation of its resources. Pakistan has been managing the deficit for decades with the borrowed money, which has invariably contributed to its debt and added to the current financial crisis. The policy planners need to focus on creating a self sustaining economy.

Shalini Chawla is a Senior Fellow at the Centre for Air Power Studies (CAPS), New Delhi

(Disclaimer: The views expressed in this article are those of the author and do not represent the views either of the Editorial Committee or the Centre for Land Warfare Studies).