Freezing the Defence Budget

Patron Lt Gen (Retd) SARDAR FS LODI examines the freezing of the Defence Budget for the year 2001-02.

In the national budget for the next financial year announced by the Finance Minister on 18th June 2001 the allocation for defence has been frozen to last year’s figure. This has been done for the second successive year. The government of General Pervez Musharraf has decided not to increase the defence budget in an effort to overcome growing poverty in the country and a balance of payments deficit. The main thrust of the budget for 2001-2002 is on “reviving investor confidence and growth in agriculture and industrial sectors to make the economy stand on its own, said Mr Shaukat Aziz, Pakistan’s Finance Minister.

Total defence spending has been capped at Rs 131 billion ($ 2.2 billion). “We are following a path of re-building the economy,” said Mr Shaukat Aziz and added, that “defence itself is contributing its share to development.” The Finance Minister went on to say at the news conference that all necessary requirements of Armed Forces are being met to ensure strong defence of the country. “We have kept our defence budget flat during 2001-2002 but I assure you it will not hurt the operational efficiency of our Armed Forces,” he said.

The total national budget for 2001-2002 is of Rs 752 billion (About $ 12.5 billion), an increase of nearly Rs 52 billion from last year’s total outlay of Rs 700 billion. This is an increase of about 7.4 percent. The total increase between the budgets of 1999-2000 and 2000-2001 was 8.7 percent. The government had allocated Rs 133 billion for defence in the 2000-2001 budget which, was Rs 10 billion less than the amount allocated for 1999-2000 revised defence budget of Rs 143 billion. That year the Army had also voluntarily accepted a cut of Rs 7 billion in its budget. The total impact of the defence budget for the year 2000-2001 was a decrease of about Rs 16 billion owing to the rate of inflation.

This year the government has allocated Rs 131 billion for defence, which is Rs 2 billion less than the previous allocation. The decrease is certainly going to be greater owing to the rate of inflation in the country. Fall in the value of the Pakistan rupee will also have an adverse effect on the purchasing power of every rupee given to the defence. According to the Khaleej Times newspaper the Pakistan rupee has lost 20 per cent of its value since July last year. The purchasing power of Rs 131 billion would be reduced to about Rs 100 billion.

The new budget estimates for the year 2001-2002 has allocated Rs 131 billion to defence out of a total budget of Rs 752 billion. This comes to about 17.4 per cent of the national budget. Down from 19 per cent from the present budget of 2000-2001. Debt Servicing has taken up Rs 329 billion out of the new budget of Rs 752 billion, which is 43.75 of the total budget. Debt Servicing has increased by Rs 23.4 billion from the previous year’s figures of Rs 305.6 billion. Debt Servicing figures will continue to rise in the years ahead.

In the total budget of Rs 752 billion just announced for the year 2001-2002, Debt Servicing has taken 43.75 per cent followed by Defence 17.4 billion. Not far behind Defence, is Running of Civil Government, which has taken 11 per cent of the budget. These three items alone have taken away 72 per cent of the Budget. As the Defence has been reduced the other two need reduction as well. Particular attention should be given to debt reduction, which seems to be rising all the time and may be our ruin one day.

The defence budget in Pakistan has been frozen or in other words reduced in real terms at a time when our neighbour has been enhancing his defence expenditure every year, often by large amounts. In the present budget India raised her defence outlay by 13.8 per cent. At this Pakistan’s Foreign Office spokesman had voiced the government’s deep concern and said India had launched itself on a massive programme of expansion of its conventional capability without regard to regional stability. The increase would upset the military balance in South Asia, he added.

The spokesman went on to say, that “the massive acquisition of armaments by India is a cause for concern for Pakistan because the bulk of India’s army is deployed on the Pakistani border. Therefore, we cannot but be deeply concerned. “He also referred to India’s huge 28 per cent defence spending hike last year and the recent multi-billion-dollar arms purchase from Russia. These were the views of the Government of Pakistan given by a spokesman of the Foreign Office only a few months back. These views do not seem to have been taken into consideration by the budget planners.

In India it seems to be the other way round. Despite the massive damage of about Rs 14,000 crore suffered by India during the Gujarat earthquake the former Indian Defence Minister is on record as having said: “No matter what problems, economic or otherwise, the country may face, the national defence cannot be held hostage to it.” He went on to say, “I am clear that when the Finance Minister (Yashwant Sinha) finalizes his budget, he will give what we ask.” This was done, although India faces no external threat to its national defence and security from her small neighbours.

Early this year while addressing the Young Presidents Organization (YPO) at Lahore, the Finance Minister Mr Shaukat Aziz said that the defence budget was being reduced. It had already been brought down to 4.70 per cent of the GDP from over eight per cent during the past several years. The statement of 8 per cent was not true. As DAWN newspaper of Pakistan and the HINDU newspaper of India had reported in 1997 that the defence forces of Pakistan earn more than half their keep on their own as the Army, Navy and Air Force together contribute more than two per cent to the country’s GNP annually. This implies that less than 4 per cent of GNP had been spent on defence.

DAWN says that it is, therefore, a wonder why the defence have not used this argument to win a billion or two, more for their annual budget. The paper goes on to say that it is stranger still to see successive governments in the country, both military and political, not making effective use of the argument in their negotiations with the donors who have been consistently demanding a reduction in the defence budget. Although the Finance Minister has hinted towards this by saying that, “defence itself is contributing its share to development.” But no further mention is made of this contribution as it may take away some praise from the present government’s efforts towards the country’s economic revival.

The allocations for defence are not arbitrary figures arrived at by the toss of a coin or based on the whims of an individual. These are in fact based on a serious study of the dangers and threats being faced by the country. Where the threat emanates from, its capabilities and future potential? After the threat has been analyzed the next step is to work out the minimum force that would be required to neutralize it and prevent its advance within the country. The force has to be adequately armed and trained. It has to be so equipped that it has a reasonable chance to perform its task against a superior foe. These are some of the calculations that the defence planners have to contend with while demanding any amount for the defence of the country.

The squeeze on the defence budget has been going on for some years now. Inflation and devaluation of the Pakistan rupee has further eroded the value of the funds allocated for the three services. In the budget of 1995-96 the funds were so eroded by inflation and the seven per cent devaluation of the rupee in that year that General Waheed Chief of Army Staff at the time had stated: “The army has not asked for a penny (more) as yet despite the fact that huge defence investment was going on across the borders” (In India). He had also mentioned about the inflation eroded funds allocated to defence.

The Armed Forces per force had to make adjustments to cater to the defence needs on the ground and in real terms. This time also some further adjustments will have to be made. But there would be a limit beyond which the adjustments would not work without affecting the credibility of the defence effort itself. As long as the threat exists a credible defence shield is essential and has to be catered for. There are no short-cuts to a viable defence effort which will stand the rigours of war.

Although the Finance Minister has assured the nation that all necessary requirements of the Armed Forces are being met to ensure strong defence of the country. It is hoped that this assurance is not a mere rhetoric but has substance, which can be reinforced in concrete terms, when required. The Finance Minister has also assured the nation that the present allocation will not hurt the operational efficiency of the Armed Forces. This should be taken with a pinch of selt coming from a man whose job it is to reduce expenditure by any means as the donors are involved who are important under the present economic crisis.

It must be realized by all those dealing with defence, and the amount being allocated for it that the nation could live without taking further loans, but it will not survive as an independent sovereign nation without a strong and effective defence effort. The choice is obvious for all to see.