Pakistan is spending more than 3.5% of its GDP on the defence budget of the country. Although overtly, it looks that this high defence expenditure can be attributed to the so called counter insurgency operations in the country. However, a closer analysis of the situation in Pakistan indicates two trends: First, the country is looking at a very realistic chance of a conflict with its neighbour India and thus military expenditure is to be boosted according to the country’s policymakers.
Second, this points to the heavy influence Pakistan military exerts on the country’s political class. This has ensured that the defence budget remains at elevated level in relation to Pakistan’s GDP. The increasing grip of the military on the political establishment also implies that security concerns will remain central to any policy discourse in Pakistan.
It was during the tenure of the military rule of Pervez Musharraf during the first decade of the 21st century that the proportion of the Pakistani budget allocated to the defence sector saw a steep rise. Apart, from the country’s budget, the military expenditure in Pakistan got a boost from a number of other sources throughout the reign of Pervez Musharraf. Military pensions accounted for 20-23% of total military expenditure – from the defence budget without a proportionate decrease in the Ministry of Defence’s allocation. Armed Forces Development Programme (AFDP), provided additional funding to the military approximately estimated at PKR 75 billion per year. A major financial support to the Pakistani military came from US support which rose significantly from around USD 500 million in 2008 to around USD 1.3 billion by 2011. It was during this period that Pakistan managed to eyewash the entire global community on its “War against terror” but multiple evidences point to the fact that US aid in the war against terror was subject to gross misutilisation by Pakistan.
The core defence budget grew further between rates between 2009 and 2014 following the departure of Musharraf, averaging 15.2% throughout the period. This was attributed primarily due to the rise in Pakistan counter-insurgency operations and also to the fact that the process of the withdrawal of the US troops in Afghanistan had set into motion. Therefore, despite unfavourable fiscal scenario, the core defence budget was around 17% of the state budget. This period was also marked by a surge in operations along the Afghan border.
It may be mentioned here that inflationary pressure can not be held as the major cause for the increase in the military budget. The increasing defence budget expenditure is a voluntary decision of the Pakistani military class. Here it must also be added that although the Pakistan government embarked on a policy to reduce the country’s overall budget deficit since 2012, the Ministry of Defence’s budget has increased at a faster rate than the overall spending.
To cite figures, the total expenditure on defence has elevated from around 20% of the state budget in 2013 to 23% under the 2017 budget. At the same time, government forecasts contained within the Medium Term Budget Estimates (MTBE) estimate that core defence budget will maintain a steady rare of real terms growth and this will be approximately in the range of 8-9%. In real terms total spending (including military pensions) is estimated around USD11.4 billion by the end of the two-year MTBE period.
Pakistan’s projected economic growth at 5-5.5% indicates that a significant amount of resources would be diverted into defence spending. This could only be reversed Pakistan decides to cut its military spending but considering the current regional Geo-political regional situation, this looks too much of a distinct prospect. However, based on current policy statements total defence expenditure – including military pensions – it can be expected that such military expenditure will reach around USD 13 billion a year in real terms by 2022. The growth in defence budget would thus be in an increasing direction.
In the aftermath of the 9/11 attack and the launch of the global war on terror by the US, Pakistan was somehow able to project itself as an ally in the war against terror. As a result, it received billions of dollars in the form of assistance. According to estimates, between 2002 and 2010, Pakistan received an estimated USD18.5 billion of military and non-military economic assistance from the US. The main instruments of such hefty US military aid were the Support Fund (CSF) and the Pakistan Counterinsurgency Fund (PCF), intended to be used to pay for military operations in support of the ‘Global War on Terror’ until funding through these measures came to an end in 2013. The funding for the CSF and PCF was provided by the US Department of Defense (DoD) and appropriated through the Overseas’s Contingency Operations (previously Global War on Terror) supplemental budget requests. Between October 2001 and June 2007, the US provided USD5.56 billion aid to Pakistan to utilise for conducting military operations along the Pakistan-Afghanistan border.
In addition to the aid, the US also the US provides financial assistance through the Foreign Military Financing (FMF), International Military Education and Training (IMET), and International Narcotics Control and Law Enforcement (INCLE) programs. Since 2005, the US has provided USD250-300 million annually through the FMF programme, around USD5 million through IMET and USD40-100 million through INCLE.
However, in recent months, particularly after Donald Trump became the US President, some tough questions have been asked of Pakistan. The Trump administration seeks to make Pakistan more accountable for the billions of aid the South Asian nation receives from the US on the pretext of being an ally in the war against terror. It will be interesting to see how Pakistan structures its defence budget spending as the US now calls for a greater oversight and accountability of the military aid to Pakistan.