Pakistan increases defence budget to Rs 1,523 bn; hikes spending by 11 per cent

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Pakistan on Friday announced that it will allocate Rs 1,523 billion for defence, an increase of over 11 per cent than last year, as Finance Minister Miftah Ismail presented a Rs 9,502 billion annual budget in Parliament for the fiscal year 2022-23.

The estimates showed that defence expenses were the second biggest component of the annual expenditure after the debt payments. The total current expenditure for the next year would be Rs 8,694 billion, which is 15.5 per cent higher than last year's budgeted figure.

According to the budget documents, the government has committed Rs 1,523 billion for the defence of the country, higher than last year’s Rs 1,370 billion, which was later on revised to Rs 1,450 billion on the demand of the ministry of defence.

The powerful Pakistan Army, which has ruled the coup-prone country for more than half of its nearly 75 years of existence, has hitherto wielded considerable power in the matters of security and foreign policy.

Former prime minister Imran Khan, who was ousted from power in April through a no-trust vote, had apparently lost support of the Army after he refused to endorse the appointment of the ISI spy agency chief last year.

This year’s defence allocation of Rs 1,523 is 11.16 per cent higher than last year’s allocation of Rs 1,370 billion. Defence spending often comes under scrutiny at the time of the annou­nce­ment of the annual budget when allocati­ons for various sectors are earmarked.

The defence expenditure makes up 17.5 per cent of the total current expenditure but it appeared as one liner in the budget as the government maintained the tradition of keeping the details of defence expenditure under the wraps.

The budget showed that debt servicing has risen to 29.1 per cent of the budget, making it the single largest expenditure and accounting for 45.4 per cent of the current expenditure. 

Finance Minister Ismail announced that the government has set the target of 5 per cent growth for the next fiscal year against the 5.9 per cent achieved against 4.8 per cent original target of the outgoing year.

It was announced that the budget deficit was 8.6 per cent of the GDP but the government committed to reduce it to 4.8 per cent of GDP.

Inflation would be reduced to 11.5 per cent, while tax to GDP ratio would be increased from 8.6 per cent to 9.6 per cent. The minister said that tax revenue has been estimated at Rs 7,004 billion for the next fiscal year.

The target for imports is USD 70 billion while that of exports is USD 35 billion. The government also hoped to receive over USD 33.2 billion of remittances against USD 31 billion received this year. 

The government also announced to provide Rs 2,000 monthly support money to 80 million highly-vulnerable people across the country. It also allocated Rs 51 billion for higher education in the country and Rs 24 billion for health.

Earlier, the special Cabinet meeting chaired by Prime Minister Shehbaz Sharif approved the budget. The Cabinet, among other last minute measures, decided a 15 per cent increase in salaries of government employees, while five per cent increase in pensions.

“The Prime Minister has rejected the Finance Ministry’s proposal of a 10 per cent increase (in salaries) and has approved an increase in government employees’ salaries of 15 per cent with the consent of the Cabinet,” information minister Marriyum Aurangzeb tweeted.

The increase will put an additional burden of Rs 71 billion on the government. The minister also highlighted the problem faced by the country.

"The problem of our economy is that growth is 3-4 per cent, but when it moves up to 5-6 per cent, our current account deficit goes out of control, because we give priority to the elite, which increases our imports.

“We need to adopt new thinking, to facilitate the lower-income section to increase domestic production," the minister said. 

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