Pakistan Increases Defence Budget by 10 Percent

13/06/2013 by Victoria Knowles - Armed Forces International Reporter

Pakistan is increasing its annual defence budget by 10 percent, the country's new government announced, only a week after taking office.

This is despite a disabling budget scarcity of 8.8 percent. For the 2013-14 fiscal year, commencing July 1, the budget comes in opposition to a climate of feeble economic growth, unprecedented power cuts, diminishing reserves of foreign exchange and high inflation.

But the new budget, announced Wednesday, allocated 627 billion rupees ($6.3 billion) for defence: this is a 10 percent increase from the 570 billion rupees earmarked for the year outgoing June 30.

Nawaz Sharif took office as Prime Minister last week following the May 11 elections, representing a historic shift in democratic power in a nation where the military ruled half of its life.

Increased Military Budget in First Week of Office

Pakistan's most powerful institution is the military. Sharif has had unfavourable relations with the army in the past, which deposed him in 1999 in a bloodless takeover.

Ishaq Dar, finance minister, informed the national assembly that the government would dispel the energy sector of $5 billion worth of circular debt, within the next two months.

"This will greatly help minimize power cuts in the country," said Dar. He provided no further particulars on how the government would actually come up with the money to foot these bills.

Years of corruption, under-investment and mismanagement have lead to blackouts spanning up to 20 hours each day, nearly the entire day, when outside temperatures are hitting up to 50c.

Pakistan continues to pay an International Monetary Fund loan amounting to $11.3 billion from five years ago.

Dar said they have drawn out a comprehensive reforms programme targeting economic development, but again provided no exact details.

Dar's government promised to cut the budget deficit during the forthcoming year by 2.5 percent to 6.3 percent, and within three years down to four percent.

"The key point of our budget this year is to reduce the fiscal deficit and prevent the national economy from being adversely affected," said the minister.

GDP for the concluding fiscal year was 3.6 percent, just short of a four percent target, said Dar. For the forthcoming fiscal year, the government has set the bar higher at a 4.4 percent target.