Pakistan increases 6%
defence budget to
Rs1.456 trillion,
forex sharply declined

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ISLAMABAD: Pakistan is likely to allocate Rs1.453 trillion to its armed forces in the next federal budget, about six percent increase which still does not completely account for the average inflationary pressure of 11.3 percent in the national economy.

The government is scheduled to present the next annual budget on Friday, June 10, as its forex reserves have sharply declined to $9.7 billion amid a widening current account deficit and double-digit inflation.

Pakistan is striving for a staff-level agreement with the International Monetary Fund (IMF) for the resumption of a loan program amounting to $6 billion since it desperately needs external finances.

As the government finalizes details of the next federal budget, the country’s defence spending has also come under scrutiny under the prevailing economic context.

“The armed forces are likely to be allocated Rs1.453 trillion in the budget for the next fiscal year, which would be about Rs83 billion higher than the outgoing year’s allocation of Rs 1.37tr, an increase of almost six percent,” reported Dawn newspaper and other news outlets after talking to defence sources.

Logos of Pakistan Armed Forces

“This year a Rs136bn raise was expected after taking into account an average of 11.3pc inflation for the outgoing year,” it added. “Therefore, in number terms, the armed forces would be getting about Rs53bn less than what they say was needed for coping with inflation.”

Much like the outgoing year, the newspaper informed, the defense budget was likely to be about 16 percent of the total outlay, though the share was expected to go down in GDP terms from 2.54 to 2.2 percent in the next fiscal year.
Defence sources report that Pakistan’s per soldier spending stood at about Rs2.65 million per annum which was “not even one-third of what India spends.”

The report also noted that the armed forces and their welfare entities paid Rs935 billion in taxes in the outgoing fiscal year, adding that the army saved and returned Rs500 million to the government from COVID-19 allocation and $16.9 million against procurements.

According to Dawn and other news sources, the armed forces are likely to be allocated Rs1.453 trillion in the budget for the next fiscal year, which would be about Rs83 billion higher than the outgoing year’s allocation of Rs 1.37tr, an increase of almost six per cent.

Defence spending often comes und­­er scrutiny at the time of the annou­nce­ment of the annual budget when allocati­ons for various sectors are earmarked.

This year a Rs136bn raise was expected after taking into account an average of 11.3pc inflation for the outgoing year. Therefore, in number terms, the armed forces would be getting about Rs53bn less than what they say was needed for coping with inflation.

Pakistan Defence Budget – (courtesy Janes Defence Budgets)

The impact of the defence spending is measured in two ways — the share of the defence services in the overall budget pie and as a percentage of the GDP.

The share in the total outlay explains how much money is going to the armed forces. Meanwhile, calculating the defence budget as a percentage of the GDP indicates its burden on the national economy.

The defence budget, going by these figures, would be about 16pc of total outlay — much similar to the outgoing year. But, in terms of GDP, its share would go down from 2.54pc in the outgoing year to 2.2pc in the next fiscal year.

The increased amount, the defence source says, will be consumed mostly by the allocation for employees-related expenses, salaries and allowances of servicemen.

Defence analysis

Other heads of the budget include civil works, which caters for the military infrastructure development and repairs; physical assets that relate to local purchases of arms and ammunition and some imports and the related costs; and operating expenses, which cover costs incurred on transport, ration, training and treatment.

The source said that the spending per soldier is about Rs2.65 million per annum, which is not even one-third of what India spends.

The source, meanwhile, said that armed forces and their welfare entities paid Rs935bn in taxes in the outgoing year. They further said that Army saved and returned Rs500m to the government from Covid allocation and $16.9m against procurements.