Defence Budget

Pakistan’s Defence Budget Myth or Reality

Strong economy and strong defence are considered to be the two pillars of the state. A strong economy can ensure strong defence; it will enhance country's power and hence make its defence even stronger. According to Paul Kennedy, a nation's military strength rests on its economic strength and military strength is nothing but power and power is defined as the ability of a country to influence the behaviour of other countries in accordance with its aims and objectives. Power can lead to prosperity and prosperity may generate more power.  According to Robert McNamara (former US Secretary of Defence and President of the World Bank) security means development and without development there is no security. Just as peace favours development, development ultimately favours peace. But peace cannot be bought, rather it is earned through diplomacy and military might.

It is equally true that economic backwardness generates violence, social conflicts and political turmoil. A strong economy, therefore, also ensures political and social stability, which, in turn, makes the economy even stronger. The moral of the story is that a strong economy is sine qua non for strong defence and not the other way around. The former Soviet Union provides a classic example of this fact. While Soviet real GDP growth continued to decelerate from an average of 7.1 per cent per annum in the 1950s to 2.7 per cent during the 1980s, its defence spending continued to rise from 9.0 per cent of GDP to 15.4 per cent during the same period. Soviet economy was not in a position to sustain such a large defence spending and eventually it collapsed as a country. It is also argued that the two wars (Iraq and Afghanistan) that the United States fought since 2001/02 contributed immensely in weakening US economy over the last one decade. It is for this reason that the government should give greater attention to economy with a view to sustaining strong defence.pak def3

Pakistan's defence budget remained under severe scrutiny, within and outside the country for decades. Every one interpreted Pakistan's defence budget from his/her own perspective and interest, often not based on facts and figures. They criticized vehemently the defence budget of Pakistan solely for political reasons by distorting the facts. Mark Twain once remarked, “Get your facts first, and then you can distort them as much as you please.” At times, those who were critical to Pakistan's defence budget, lost rationality. Those who presented facts were dubbed as agents of the “Establishment”. In this article, I intend to analyze Pakistan's defence budget by presenting facts, as facts speak themselves.

Certain myths have been created by the critiques about the defence budget of Pakistan. These include: i) that 80 per cent of Pakistan's budget is being consumed by Pakistan Armed Forces, ii) that defence budget is the single largest component of Pakistan's budget, and iii) that defence budget is rising at a much faster pace than other critical expenditures. Is this a myth or a reality? This article intends to answer these queries by presenting facts.

What Determines a Country's Defence Budget?

A country's defence spending depends on a combination of different factors that include:

•           War or the perceived risk of war.

•           Security environment, such as:

                                    military expenditure incurred by neighbours.

            the momentum of the regional arms race.

            attitude of the neighbours (friendly or hostile).

            geo-strategic considerations.

•           Armed conflict and policies to contribute to multilateral peacekeeping operations.

•           Availability of economic resources.

pak def4Pakistan is in the midst of war on terror since 2001; a war which has cost the nation dearly in terms of men and material, and finances. The invasion of the United States in Afghanistan after the shocking event of the 9/11 opened up a new frontier (western front) for Pakistan to guard its national security. Pakistan continued to witness the rise in violent extremism and terrorism which has caused large-scale human suffering. The country has lost over 50000 civilians and security forces personnel beside a cumulative loss of over $100 billion in the last 13 years (Source: Pakistan Economic Survey 2013-14, Government of Pakistan). This has been the longest unconventional war that the country has fought thus far. The war is still continuing with greater intensity and dimension. It is quite natural that a country allocates relatively more financial resources to defence during the war periods and relatively less during the peace time. For example, the United States spent $1.5 trillion as war supplement cumulatively over the last 13 years over and above of its normal national defence budget which is about 4 per cent of GDP (Source: Growth in US Defence Spending Since 2001, US Department of Defence FY 2014 Budget Request, April 2013). As long as Pakistan continues to face unconventional war, the defence and security related expenditure may continue to rise. Did Pakistan's defence continuation of receiving adequate resources commensurate with evolving threat? The answer will be provided shortly.

Military expenditure incurred by neighbours, the momentum of the regional arms race and attitude of the neighbours also determine the size of the defence spending. Prior to the United States' invasion of Afghanistan and the subsequent developments for Pakistan's security, it concentrated exclusively on its eastern border with India for its defence. The invasion of Afghanistan has changed the security environment for Pakistan altogether. In addition to looking after the eastern border, Pakistan has been spending additional resources to protect its western border with Afghanistan. Such a change in security environment must have contributed to the rise in defence spending.

Pakistan has fought three wars with India since its inception in 1947. India's defence spending is rising at a pace that puts her at the list of the top ten defence spending countries in the world. India spent $39 billion in defence and accounted for 2.4 per cent of the world's military spending in 2009. Its defence spending rose to $47.4 billion and accounted for 2.7 per cent of world military spending in 2013. India's defence spending is close to that of Japan ($ 48.6 billion) and Germany ($48.8 billion). It has indulged in arms acquisition in a much larger way as well (Stockholm International Peace Research Institute (SIPRI) Year Book 2014).

India is not only a nuclear power but is actively involved in the development of thermonuclear weapons by expanding a covert uranium enrichment plant. The newly elected government in India under the leadership of Prime Minister Narendra Modi intends to build up India's military capability by inducting more sophisticated weapons in its armoury. In so doing, the government intends to spend additional $200 billion in acquisition of sophisticated weapons (Source: Farrukh Saleem, Monthly Hilal, June 2014). Western power, in order to get their shares of pie, are rushing to India and encouraging it to go for large-scale acquisition of arms and ammunitions. Although India would justify its arms acquisition and weapons development programmes to counter China in the region (India has fought a low intensity border war with China in 1962), the fact of the matter is that these large-scale military spending on arms acquisition and weapons developments are purely directed towards Pakistan. Such developments are bound to force Pakistan to raise its defence spending to maintain a minimum deterrence viz. India.

Armed conflict and police to contribute to multilateral peacekeeping operations also determine the size of a country's defence spending. Pakistan has been the single largest contributor of armed forces to the United Nations peacekeeping operations in conflict zones in different parts of the world (See monthly Hilal, June, 2014). This may have contributed to the rise in defence spending in Pakistan.

Availability of economic resources is yet another factor that determines the size of defence spending in a country. China and India, the world's two emerging economic powers, are demonstrating a sustained increase in their military expenditure and contributing to the growth in world military spending. In addition, high and rising world market prices for fossil fuels and minerals have also enabled some countries (Russia, Saudi Arabia, Azerbaijan, Chile and Peru) to spend more on their militaries (see SIPRI Report 2006). Has availability of economic resources helped Pakistan to raise its defence spending? Or did Pakistan raise its defence spending during the periods of economic boom? This is a valid question to which I will return shortly.

Defence Spending: The Reality

Various myths pertaining to Pakistan's defence budget have been created within and outside Pakistan. What is the reality? This leads to our discussion on the factual position of Pakistan's defence spending. Table 1 and Fig.1 are enough to break the myth about Pakistan's defence budget. Pakistan's defence budget at current rupee/dollar stood at Rs. 131 billion or $ 2.24 billion in 2000-01 and increased to Rs. 630 billion or $ 6.0 billion by 2013-14 – thus exhibiting a growth of 11.9 per cent and 7.3 per cent respectively. In other words, in rupee and dollar terms, Pakistan's defence budget increased by 4.8 times and 2.7 times in the last 14 years.

Defence spending at current rupee or dollar is uninteresting. Economists around the world have measured or presented defence budget at constant rupee or constant dollar term. In so doing, they took care of inflationary build up in the country. After adjusting for price level, Pakistan's defence spending increased from Rs. 131 billion to Rs. 199 billion or has grown at the rate of 3.0 per cent per annum over the last 14 years. Similarly, in constant dollar of 2000, Pakistan's defence budget increased from $ 2.24 billion to $ 4.33 billion during the same period, thus showing a growth of 4.8 per cent per annum. More importantly, contrary to the general perception, Pakistan's defence budget did not even double in the last 14 years (see Table 1).

pak def5Is defence spending a burden to the nation and its economy? Defence spending in relation to the size of the GDP as well as in relation to the size of the budget represents a burden to economy and budget, respectively. Table 2 and Fig. 2 clearly indicate a declining trend in defence spending. Pakistan's defence budget was 3.2 per cent of GDP in 2000-01, remained stagnant at that range until 2004-05, but declined to below 3.0 per cent of GDP in 2005-06. For the last six years, it has remained stagnant at 2.5 per cent of GDP – much lower than many developing and emerging economies. As total or consolidated size of the budget, defence spending continued to exhibit a declining trend over the last 14 years, declining from 18.3 per cent in 2000-01 to 12.1 per cent in 2013-14.

Conclusions

Contrary to the general perception created by the vested interest that “Pakistan's defence spending accounts for 80 per cent of the total budget”, the readers should know that it accounts for only 12 per cent of the budget and in fact, it was less than the subsidy provided by the government to its citizens in 2011-12 (12.8 per cent of the total budget) in the midst of war on terror. In constant dollar, the per capita defence spending increased from $16 in 2000-01 to $23 in 2013-14. It has virtually remained stagnant over the last 14 years as can be seen through Table 2 and Fig. 3.

For those who have interest in Pakistan's defence budget should know that interest payment is the single largest expenditure item of Pakistan's budget. Defence spending has remained almost one half of the interest payment over the last 14 years (See Table 3). Fiscal profligacy contributed to the persistence of large fiscal deficit, resulting in accumulation of public debt and contributing to the surge in interest payment accordingly. While defence spending was 18.3 per cent of the size of the budget in 2000-01, interest payment was almost 35 per cent. Even today, the interest payment accounted for 23 per cent of the budget as opposed to 12 per cent in the case of defence spending. Table 3 reveals that defence spending became a victim of rising public debt and concomitant rise in interest payment. As public debt rose because of the persistence of large fiscal deficit, interest payment continued to rise. To keep the budget deficit at a manageable level, the axe always fell on defence and development spending, including social sector. Interest payment alone is more than the combined spending on defence and development. It is the rising interest payment which is more worrisome than defence spending for the budget as well as for the economy. Surging interest payment has eroded fiscal space and forced the successive governments to keep allocation to defence and development at a bare minimum.

Concluding Remarks

As stated at the outset, Pakistan's defence budget has remained under severe scrutiny within and outside the country. Such scrutiny has never been based on facts. An attempt is made in this paper to present facts about the defence budget of Pakistan. The main findings of the paper are summarized as follows:

Given the size and the dimension of national security challenges that Pakistan has been facing over the last 14 years, its defence budget has never been consistent with growing national security challenges.

Defence spending as per centage of GDP and the size of the budget has been on the decline, even in the midst of war on terror, the country is fighting for the last 14 years.

Pakistan is spending 2.5 per cent of GDP, 12 per cent of the size of the budget (not 80 per cent as critiques within, and outside, the country have always been quoting to misguide the people) and $23 per person on defence  all during the war on terror.

It is the growing interest payment and not the defence spending which should worry us all. Fiscal profligacy contributed to the surge in public debt which, in turn, caused interest payment to balloon. Defence spending has been onehalf of the interest payment. Interest payment even surpassed the combined spending of defence and development.

Defence and development spending have been the major victims of ballooning interest payment.

While Pakistan's arch rival India continued its procurement drive of sophisticated weapons and emerged as top ten spenders on military in the world, Pakistan continued to spend modestly (2.5% of GDP and $23 per person) to maintain its minimum deterrence.

Encouraged by the western powers, India is spending over $47 billion on defence and intends to spend additional $200 billion in weapon acquisition in the next few years. Pakistan, on the other hand, is fighting a non-conventional war for 14 years in a row with differing intensities and continued to exhibit a declining trend in its defence budget. Even during the period of relatively stronger economy (2002-2007), its military spending continued to witness a declining trend. Therefore, the availability of resources did not increase defence spending in the case of Pakistan. The burden of defence budget continued to witness a declining trend.

Pakistan needs to give more attention to its economy. A strong economy can sustain higher defence spending but not the other way around. A large slippage is bound to take place in defence spending during the current fiscal year (2014-15) owing to the largescale military operations in North Waziristan area. The government has allocated Rs. 700 billion or roughly $7.0 billion in 2014-15 budget. Given the scale and dimension of military operations and the attendant rise in expenditure, large slippages in defence spending cannot be ruled out.

In the end, I would urge the critiques within, and outside, Pakistan that if they want to criticize defence spending, their facts should be right. Unilaterally criticizing a country's defence budget would not serve any purpose. Critiques must take into consideration the various factors that determine the size of any country's defence budget. When hostile neighbours go on spending spree on weapon acquisition, it is difficult for a country to cut its defence spending. Easing of international political climate may create the potential for reduction in defence spending.


The author is Principal & Dean at NUST School of Social Sciences & Humanities, Islamabad.

[email protected]

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