As Imran Khan’s government unveils its first budget, it must revisit its priorities, maintains Taha Siddiqui, if the country wants to truly progress
A few days before the Pakistani government disclosed the annual budget for the year 2019/20 – a first for the administration led by Prime Minister Imran Khan – the PM announced that the country’s military had opted for a voluntary budget cut due to the financial turmoil Pakistan is facing. In a tweet posted from his official account, Khan said, ‘I appreciate Pak Mil’s [military’s] unprecedented voluntary initiative of stringent cuts in their defence expenditures for next FY [fiscal year] bec [because] of our critical financial situation, despite multiple security challenges. My govt will spend this money saved on dev [development] of merged tribal areas & Balochistan.’
And he is right. Pakistan is witnessing one of the worst economic crises in recent times. Inflation is at a nine-year high, touching almost 10 percent and expected to rise even further. The growth targets that were set at 6.2 per cent last year were missed by at least 50 per cent and revised down to 3.3 per cent, with the economy expected to slow down further next year. The Pakistani rupee has lost one-third of its value against the US dollar in the last year.
As soon as Khan came to power, he went around the globe looking for aid. He then recently, and reluctantly, announced that his government was going to opt for a $6 billion bailout package agreement with the International Monetary Fund (IMF) over the next three years. Initially, the government had claimed it would never ‘beg from the IMF’ but, given Pakistan’s economic turmoil, it appears they had no choice. However, the IMF is demanding structural reforms and a reduction in current expenditure among its many other conditions for giving the loan, which could then lead to additional funds from the World Bank and the Asian Development Bank. Hence, many believe the military expense cut was not a voluntary move at all, but part of the IMF deal.
Yet when the government presented the yearly budget in parliament on June 11, surprisingly there was no cut in the defence budget. On the contrary, there was a 21.5 percent increase in the expenditure allocated for the military from last year.
So it appears that the earlier announcement of a budget cut by the Pakistani PM was more of a PR exercise, and as yet no explanation has been given by the government as to why the proposed cut did not translate to an actual reduction. Moreover, the country’s political class – both in the ruling party and in opposition – also remain tight-lipped about the whole affair, perhaps because questioning the military brass can land one in trouble in Pakistan.
But it is not just the official disbursements that one cannot question, since the budget that the military officially receives is not even representative of the complete picture. For some years now Pakistan’s finance ministry has been fudging the defence budget numbers by filing some military expenses under civilian allocations, including military pensions and certain other security-related expenditure, which are shown under the Public Sector Development Programme (PSDP).
After paying out for debt-servicing, Pakistan’s second largest expenditure is on its military and the spending keeps increasing. In the last budget cycle, it received a 20 percent hike in its yearly allocation.
The military justifies its oversized budgetary requirements by ensuring Pakistan remains a security state embroiled in local and regional conflicts. It secretly supports militants and extremist groups that create a low intensity conflict inside Pakistan and in the region. In turn, the military offers its protection services to keep Pakistan safe from the very threats it has helped perpetuate.
But it is not just the budget with which the Pakistan Army burdens the country it has directly ruled for half of its 72 years of existence. The military has also pushed for a bigger share in Pakistan’s economy. Currently, it runs a business empire worth over a US$100 billion. Officially it has acknowledged that it runs about 50 commercial entities, though unofficially there may be more. The military’s main business arm, the Fauji Foundation, has seen enormous growth in the last few years. According to a recent report, the Foundation’s assets grew 78 percent between 2011 and 2015, and it has an annual income of over $1.5 billion, with stakes in real estate, food and the communications industry.
And in recent months, it appears that the business wing of the military is expanding even more under the Khan administration. It recently emerged that the Pakistan Army is moving into another lucrative industry: mining and oil exploration. The government is reportedly facilitating the arrangements by giving the military preferential treatment during negotiations.
So, besides getting the lion’s share in the annual budget, the army also wants to protect its investments. Many believe, therefore, that Khan was supported in his bid for power by the military so it could continue to run its operations smoothly.
Now it seems it is going to exert further control over Pakistan. The government recently announced a high-powered National Development Council (NDC), which will set up the country’s long-term economic policy, and of which the all-powerful army chief, General Qamar Javed Bajwa, has been made a member. This will further strengthen the army’s grip on Pakistan’s affairs when what the country’s needs is a lighter military footprint.
The civilian government must realise that the more the military’s role in the economy expands, the harder it will be to push the institution back into a morelimited and appropriate role. IfPakistan wants to truly progress, the first step towards achieving that is to re-prioritise its spending. The country currently spends less than 5 per cent on social development sectors such as health and education. Unless and until it focuses more on these key areas, and less on being a security state, the economy will remain weak and the future dark.