Defence budget to rise by 12%

Wide discrepancies between ‘stated’ military budgets and actual expenses.

ISLAMABAD:

The government is set to announce a defence budget for the upcoming fiscal year that will be just over a quarter of its targeted tax revenues, though a careful analysis of the allocations suggests that the numbers understate the full costs of military spending.

The ‘stated’ defence budget for the fiscal year ending June 30, 2012 is likely to be Rs495 billion, an increase of Rs53 billion or 12 per cent over the previous year’s ‘stated’ budget, a rate of increase that is nominally below inflation. This, however, masks actual defence expenditures in several ways, including transferring military pensions to civilian expenses and counting ‘security’ operations separately.

Finance ministry sources say the government is likely to allocate Rs216 billion for security purposes under several non-descript headings, which include military operations and are paid for in part by Coalition Support Funds received from the United States, but also include grants from the federal government. The finance ministry typically shies away from discussing these grants in any detail.

In addition, military pension bill is likely to be included in the civilian side of the federal budget, continuing an accounting trick first employed by the Musharraf administration, designed to lower the military budget while continuing expenses at the same levels. For the outgoing  fiscal year, this amount came to Rs60 billion and is likely to be higher for fiscal year 2012.

Total military expenses, therefore, are likely to exceed Rs767 billion, though not all of this amount will be paid by the Pakistani taxpayer.

Stated nominal military expenses have risen by 29 per cent over the past two fiscal years, almost exactly in line with inflation, despite several military operations against militants having been launched in the tribal districts and Swat during that time.

Some independent analysts, however, believe that the military allocations may need to be reviewed in light of the May 2 US raid on a compound in Abbottabad that killed al Qaeda leader Osama Bin Laden.

“We cannot dole out money anymore without assessing the actual needs and without setting the benchmarks,” said defence analyst Ayesha Siddiqa, adding, “It is high time to issue a white paper on defence to assess what we have so far got and what we lost and what are the actual security needs.”

Even former military officials were willing to concede that more oversight may be needed.

“Effective oversight of the defence budget is a must. It is also good for the country and the democracy,” said retired Lt Gen Talat Masood. He said unless the government introduces real oversight of the defence budget it will remain dependent on the army.

Defence budgets have never been debated in Parliament and are always assumed to be a given during the presentation of the annual money bill. In the past, defence budgets were frequently limited to one line. Over the last few years, that number has since expanded to three lines but no further details are provided.

For fiscal year 2011, the full extent of military expenditure will only be made clear when the government announces its supplemental budget, to be released on the eve of the new budget for fiscal year 2012. Finance ministry sources say that the government has added an additional Rs47 billion to the original allocation of Rs442 billion, though the government has not yet acknowledged this figure publicly.

The government has targeted collecting Rs1,952 billion in taxes for the upcoming fiscal year. Of this amount, nearly Rs1,000 billion will be taken up by debt servicing and over Rs495 billion by defence, leaving around Rs457 billion, or about 23.4 per cent, of actual tax revenues to run the rest of the government and hand out billions of rupees in subsidies.

Published in The Express Tribune, May 10^th, 2011.