Pak. to freeze defencebudget for four years

By B. Muralidhar Reddy

ISLAMABAD, MARCH 18. Faced with a severe resource crunch and a staggering external debt, Pakistan has decided to freeze its defence budget in real terms for the next four years.

The military government led by Gen. Pervez Musharraf has accepted this key recommendation made by a high-level committee on Debt Reduction and Management headed by the Finance Minister, Mr. Shaukat Aziz.

Though it is the consequence of the serious economic situation in the country, it is indeed bold on the part of Pakistan to make public its decision to keep the defence budget constant in real terms.

More so, because the decision of the military establishment has come immediately after the Indian Government increased the outlay on defence by nearly 14 per cent in the budget proposals for 2001-2002 unveiled by the Finance Minister, Mr. Yashwant Singh, on February 28.

The stepped-up Indian defence outlay has been a subject of furious debate in the Pakistani media and the civil society in the last few weeks. There has been a torrent of criticism directed at the Indian Government ever since the Pakistan Foreign Secretary, Mr. Inamul Haq, pointed out a day after Mr. Sinha's budget that the defence spending of India in the last two years has gone up by more than 50 per cent.

The top brass of the military is seriously concerned over the development but at the same time is helpless given the bleak economic scenario in the country. Declaring that it has no intention to join the arms race with India, it has vowed to take `appropriate steps'.

A meeting of the Corps Commanders, who play a crucial role in the decision-making process of the military government, is scheduled to be held at the General Headquarters in Rawalpindi tomorrow. To be presided over by Gen. Musharraf, the meeting is expected to contemplate on ways to meet the challenge arising out of the massive increase in the Indian defence budget.

In other words the Generals would deliberate on the various options before Pakistan to keep the military `balance' given the stark reality of its inability to step up the defence budget. It is more out of compulsion rather than a deliberate and conscious policy option.

A cursory glance at the report of the Debt Reduction and Management Committee is enough to understand the logic behind the decision of Pakistan to keep its defence outlay at the constant in real terms.

Thanks to the reckless borrowing and imprudent economic policies of the successive government, Pakistan is neck deep in debt both internal and external. The external debt of the country is estimated at $37 billion and that is equivalent to nearly 300 per cent of the annual foreign exchange earnings of the country.

On account of debt servicing alone Pakistan would have to shell out nearly $5 billion every year provided it does not resort to fresh borrowings. Besides the trade gap, difference between imports and exports, is $1 billion. In 2000-2001 the export target is pegged at $10 billion, while the import bill is a little over $10 billion. In 1999-2000 Pakistan earned just over $8.5 billion in foreign exchange.

In other words more than 50 per cent of its foreign exchange earnings would go on servicing the external debts alone.

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Section  : International
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