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Budget 2019-20: Defence budget to grow nominally next year

ISLAMABAD: Defence budget is proposed to grow nominally in the next financial year by 4.74 per cent as compared to the outgoing year, but its share in the total outlay and the gross domestic product (GDP) is set to decline, according to the budget documents laid before the National Assembly on Tuesday.

The government has proposed to allocate Rs1.15 trillion for ‘Defence Affairs and Services’ for 2019-20 as compared to the original allocation of Rs 1.1tr for the outgoing year. The actual expenditure incurred during the outgoing year slightly overshot the budgeted amount by nearly 3.4pc and remained at Rs 1.137tr, as per the revised figures for defence budget for 2018-19. The new allocation is almost flat when compared with the revised figures.

While presenting the Finance Bill, 2019, Minister of State for Revenue Hammad Azhar said the defence budget would remain stable at Rs1.15tr during the next fiscal year. He thanked the armed forces for voluntarily cutting their expenditures in view of the economic situation and assured that the defence capability would remain unaffected.

Read: Austerity measures: ‘We are one through thick and thin,’ says army chief

Army Chief Gen Qamar Bajwa had last week announced that the armed forces were “foregoing routine increase in annual defence budget”. Prime Minister Imran Khan had then said the military had “voluntarily agreed” to cut its expenditures due to “critical financial situation”.

Mr Khan had promised to spend the saved amount on development of Balochistan and the erstwhile tribal areas that have been merged with Khyber Pakhtunkhwa.

A closer analysis of the proposed defence allocation shows that it makes 14pc of the total outlay and 2.62pc of GDP. In the outgoing year, the amount earmarked for defence was 18.5pc of the total pie and 2.87pc of GDP.

The defence allocation does not give the complete picture of the defence spending, as it does not include Rs327 billion earmarked for pensions of retired soldiers next year. The pension bill for troops would shoot up by nearly 25pc in the coming year over the previous year. Allocations for major procurements and strategic programme are, moreover, never made public.

The virtual freeze on defence budget would affect the ‘civil works’ head the most as it has received a 12.77pc cut. The civil works head accounts for the funds marked for maintenance of existing infrastructure and construction of new buildings. The other head to get relatively lesser increase is that of operating expenses, which would grow by 4.4pc. Operating expenses cover transport, POL, ration, medical treatment, training, etc. Meanwhile, employee-related expenses, which include salaries and allowances paid to troops in uniform and civilian employees, are proposed to go up by 6.5pc.

In line with the announcement by the civilian and military leadership that defence capacity would not be affected, the expenditure on ‘physical assets’ is set to increase by 11.7pc. This head provides for local purchase and import of arms and ammunition and related procurements. Last year when the defence budget was hiked by massive 18pc, the physical assets head had received a 16pc raise.

Who sacrificed the most?

The army traditionally had the lion’s share in defence budget. This year the allocation for the army would remain static at Rs523bn. It still accounts for 45.4pc of the total defence allocation. The budget of the Pakistan Air Force (PAF), meanwhile, would increase by 9.64pc. Over 22pc of the defence allocation would go to the air force. The Navy’s share would expand by 9.6pc. Its share in the defence pie is 11.3pc. The defence establishment/inter-services institutions are getting 8.78pc hike in their budget. They account for 21pc of the remaining defence allocation.

The addendum story

The pink book, which carries the details of budgetary demands, further revealed that initially the government had planned to allocate Rs1.2tr for defence. However, the figure was at the eleventh hour revised downward to Rs1.15tr.

The figure of Rs1.2tr has remained in the book and an addendum had to be added to reflect the changed allocation along with its breakdown. In the original scheme of things, the army’s share was static, whereas that of PAF was to increase by 18.31pc, Navy by 19.95pc and defence establishment/inter-services by 18.48pc. Apparently, the PAF, Navy, and defence establishment/inter-services at the last stage agreed to slash their raise and accept on average a 9pc hike.

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