Fudging the defence budget figures?

If the past is any guide, the revised figures would exceed the budget figures, accounts would exceed revised figures.

How much do we spend on defence? Some days back, a military spokesperson was quoted in these pages as claiming that defence expenditure made up no more than 14 per cent of the national budget. I thought that the government had, perhaps, made a radical departure from its historical expenditure patterns leaving development to the donors and consuming the large bulk of its current budget in debt servicing and defence. Or maybe, I had been reading the budget wrong. I looked these figures up again and again in the ministry of finance documents, numbering over 10, but could not find anything in support of the claim made by the military spokesperson.

Take for instance the Budget in Brief 2010-2011, as corrected on June 9, 2010. Since defence is an item of the current or non-development budget, its relative share is determined as a proportion of the total current expenditure. The budget for the ongoing fiscal year, 2010-11, allocated Rs442.2 billion, an increase of 28.95 per cent over the previous budget. As a percentage of the total current budget, its share comes to 22.13 per cent, not the 14 per cent claimed by the military spokesperson. It may be said that the 14 per cent claim referred to the actual spending during the year 2010-11. This was also checked from the data on fiscal operations for the first six months of the year, i.e. July-December 2010, placed on the website of the ministry of finance. According to this data, defence expenditure in these six months stood at Rs215 billion, or 24.54 per cent of current expenditure in the same period. All indications are that the year will close at an even higher share.

So where does the 14 per cent claim come from? Perhaps the spokesperson was referring to the previous year’s revised expenditure, this being the last full year with an estimate of actual expenditure. Well, the revised defence budget for 2009-10 was Rs378.1 billion. As a percentage of the revised current budget, the share of defence actually declined to 18.75 per cent, but was still higher than 14 per cent. In case the reference was to the original defence budget of 2009-10, earmarked at Rs342.9 billion, the share would still be higher than 14 per cent. It was 20.18 per cent of the current budget for 2009-10.

It seems that the claim of 14 per cent was based on the original budget provisions of 2009-10. Thus the total expenditure figure of Rs2,482.3 billion, development plus non-development, was taken as the denominator, and the defence expenditure of Rs342.9 billion as the numerator. The resulting ratio comes to 13.8 per cent, which was rounded off to 14 per cent for the sake of convenience. Apart from the selectivity with respect to the choice of the year, and a deviation from normal practice in terms of definition, the calculation is internally inconsistent. The numerator should include development expenditure executed by the defence establishment and exclude the development expenditure of the provinces. The numerator should also legitimately include defence pensions. These corrections would raise the share of defence to 18 per cent. But all these are figures from the original budget. If the past is any guide, the revised figures would exceed the budget figures and final accounts would exceed revised figures. They would, however, be far less than 40 per cent, the alleged share of defence that prompted the 14 per cent response in the first place.

Published in The Express Tribune, March 25^th, 2011.