Raise in defence expenditure viewed with doubts

June 20 - 26, 2005

Pakistani economists and defence experts have sharply criticised country's defence expenditures and other budgetary measures, which they said, would continue to add people's woes, already living under grinding poverty.

Pakistan last week unveiled 1.09 trillion (18.16 billion dollars) national budget for the fiscal 2005-6, reflecting hike in defence expenditures and boosting development outlays.

The country raised its defence budget by 15.5 percent to 223 billion rupees, but finance minister Omar Ayub linked the expenditures with gross domestic product (GDP) growth, which posted 8.4 percent rise in the fiscal ending June 30.

"We can create jobs only by investing more on industrialisation and infrastructure and need to revisit our expenditures on defence, especially when tension is melting with India," retired army general Talat Masood said.

The 'irreversible' peace process between the two arch rivals, which have fought three wars, was initiated in April 2003 after the tensions spiked in 2002, when the duo mobilised the troops on borders followed a deadly raid on India's parliament in December 2001, which New Delhi blamed on Pakistani-backed militants.

"Expenditures on non-combatant and non-operational heads ought to be lessened," he said.

Critics said the defence expenditures were quite non-transparent and thus carried doubts on its justification.

"Our defence needs definitely call for appropriate allocation but the nation should know as to how much is being expended on lavish expenditures to maintain lifestyles of senior officers and their spouses and how much on genuine needs," independent economist Qaiser Bengali said." It should be transparent."

Measures for poverty reduction may also not be so effective as institutional weakness, corruption and other factors could not translate development budget into a reality, they said.

"The government has allocated a considerable sum for development and poverty elevation but its utilisation always carries a big question mark as 60 to 80 percent of the allocation remains unutilised," chief of Research Institute of Islamic Banking and Finance, Shahid Hasan Siddiqui, said.

The government vowed Monday to undertake a wide network of roads, dams and other infrastructure work under the 272-billion-rupees Public Sector Development Programme, which has handed a large increase in financing.

"A significant increase was also made in the outgoing financial year for development but it failed to deliver and flopped in generating employment, which to our statistics looms at 8.5 percent to nine percent," Siddiqui said.

Official data shows that unemployment has been static at 7.9 percent for past two years.

The economists rather insisted that unemployment had increased in past five years.

"In 1999, when the rulers took over the government, unemployment rate was 5.89 percent and this is according to government's own figure and now if the government figure of 7.69 percent unemployment is accepted even then it showed a rise," he said.

Economists also rejected measures for giving relief to poor and salaried class, saying the increase was not even a 'peanut'.

"On one side, they have raised, but that too slightly, the salaries of the government employees but then taken it back from the other by raising sales tax by 55 billion rupees, a tax payable by all and the rising inflation," he said.

In a move to relieve the financial pressure on civil servants, Ayub said the government would raise their wages by up to 30 percent whereas minimum wages of labourers were also raised to 3000 rupees (50 dollars) a month from 2500 rupees.

"This is simply a joke with labourers as authorities have already failed to even implement the earlier rates," remarked Bengali, former chief of Social Development and Policy Institute (SPDC), an apex research institute.

Kaiser, who has been engaged in research on macro-economic issues of the country for the past 25 years, said he always felt proud of the country as he never found hunger cases throughout his field work though malnutrition was rampant.

"But for the past three years I have seen hunger cases and that too in urban settlements like Karachi," he said.

"The budget is good for rich and bad for poor, as I can simply define it," he said.

"It (the budget) is more business friendly but not pro-people at all," Siddiqui remarked.

Pakistani capital market, however, is content with the budget as their fears of a rise in share trading tax proved baseless.

"The market was fearing a rise in the turnover tax but the budget did not incorporate that increase giving a sigh of relief to

investors," Director Jahangir Siddiqui Capital Market Mohammad Sohail said.

"The overall budget would cast neutral to positive impacts on the capital market," he said.