Pakistan has announced a “debt-driven” and “defense-laden” federal budget for the 2018-19 fiscal year that shows current expenditure swallowing up the entire national revenue and leaving virtually nothing for social development and the public sector.
The budget documents reveal that half of the year’s federal outlays will go to defense and debt-servicing liabilities, while the government will need to sign fresh loans worth Rs 1.89 trillion (US$16.4 billion) to offset the budgetary deficit and make budgetary projections realistic and achievable.
Newly appointed Finance Minister Miftah Ismail, who was promoted to the post at the last minute, announced the budget of the outgoing Pakistan Muslim League-Nawaz (PML-N) government on Friday amid raucous resistance from opposition parties, which wanted it to present a three-month budget instead of a year, saying the PML (N) was not mandated to cover the longer term.
With a total outlay of Rs 5.9 trillion ($51.3 billion), the budget projected tax and non-tax revenue of Rs 5.7 trillion ($49.6 billion). The provincial share in the divisible pool (revenue pooled for distribution among federal and provincial governments) is estimated at Rs 2.6 trillion ($22.6 billion) leaving Rs 3.1 trillion ($26.96 billion) at the disposal of the federal government to run the military and civil administration.
Out of total revenue of Rs 3.1 trillion (close to $27 billion), the government has to finance outlays of Rs 4.2 trillion ($36.5 billion), which will result in a whopping fiscal deficit of over Rs 1.1 trillion ($9.57 billion) in running expenditure alone. The budget development component is pitched at Rs 1.67 trillion ($14.5 billion), which will exert further pressure on revenue and widen the resource gap.
42% to pay back public debts
The single biggest chunk of funding was allocated for debt liabilities. The need to pay back huge public debts has paralyzed the national economy. Some Rs 2.22 trillion ($19.3 billion) has been stipulated in the budget for that, which is over 42% of the total budgetary outlay of Rs 5.25 trillion ($45.6 billion).
The defense allocation is next biggest with Rs 1.1 trillion ($9.57 billion), an increase of 20% over the budget for the 2017-18 fiscal year. Another Rs 100 billion ($869.57 million) was proposed for the Armed Forces Development Program (AFDP), and another allocation of Rs 260 billion ($2.3 billion) will be made from the civilian budget for the military pensions, which are not included in defense spending. That means real and “camouflaged” defense-related outlays make up 38% of budget outlays.
Pakistan’s defense minister claimed on Monday that the “challenging security environment” and “economic determinants of security” necessitated a hike in defense spending. However, independent military analysts believe that ongoing military-led operations in tribal areas, plus the deployment of rangers in the Sindh and Punjab, security for the China-Pakistan Economic Corridor (CPEC) and tension on the Line of Control (LoC) with India, spurred the huge outlays.
During the outgoing fiscal year, the federal government spent over Rs 18 billion ($158 million) on fencing the Pakistan-Afghan border to try to stop cross-border infiltration by terrorists and Rs 10 billion (nearly $87 million) on raising a special security division to protect Chinese workers on CPEC projects.
A highly placed source at the Finance Ministry told Asia Times the Trump administration’s new regional strategy for South Asia has led to a cut in US security assistance funding. The changed US approach had intensified the Pakistan army’s financial woes, he said, and put pressure on the national kitty.
Cash for religious fanatics
He said Rs 4.5 billion ($39 million) in “extra-budgetary grants” would go to the Inter-Services Intelligence (ISI) for “strategic assignments” but could not explain what these were. However, last year the ISI distributed cash envelops among religious fanatics such as the Tehrik-e- Labaik party, which staged a sit-in in Islamabad. A number of religious outfits both in and outside the country are believed to be on the ISI payroll and it has an unaudited account at its disposal.
The defense budget includes Rs 423 billion ($3.7 billion) for salaries, Rs 253.5 billion ($2.2 billion) for operating expenses, Rs 282 billion ($2.4 billion) for local and foreign purchases, plus Rs 141 billion ($1.2 billion) for civil works.
Revenue constraints are such that the government has halted payment of an export rebate on sales and income tax to exporters. The Federal Board of Revenue suddenly declined to entertain refund claims from exporters, saying there were no funds allocated for that in the budget. That caused the Federation of Pakistan Chamber of Commerce & Industry (FPCCI) to lodge a protest with the Finance Ministry on the issue.
FPCCI president Ghazanffar Bilour told the Asia Times: “Yes, we will approach the Supreme Court if the government fails to pay the outstanding export refunds on sales and income tax worth Rs 400 billion ($3.48 billion), as are we left with no other option but to initiate legal proceedings for the recovery of our legitimate dues.”
Finance minister to discuss export rebate
He said the refund had become a serious issue because there were no concrete measures to resolve exporters’ grievances in budget proposals unveiled by Finance Minister Miftah Ismail on Friday. Rather, the refunds anomaly was deferred, which would hurt exports and cause financial losses for exporters, who already face a dire liquidity crunch.
Asked how he would define the budget, Bilour said: “The budget proposals carry many good measures but the widening trade gap is a serious issue which will become alarming if the government does not give refunds to exporters.”
He warned that many export-oriented industries would stop production and unemployment would increase if the government did not fix such anomalies.
Bilour said the new minister had invited FPCCI to Islamabad to sort out budget-related issues. So, they would form an ‘anomaly committee’ in consultation with member chambers and trade associations by Thursday to meet him. And the government would also set up a budget anomalies committee to look into exporters’ problems, he said.
Merely flashing the figures without having a detailed insight of the defence budget expenditures will result into such reporting. Defence spendings of US and other contemporary countries can be reviewed to draw analytical inferences.
The US war in Afghanistan has been a huge burden for Pakistan’s economy, Politician Imran Kahn estimate $100 BILLION in lost revenues. It seems the Pakistani Military, intelligence agencies, the politicians, and 90% of the Pakistanis have had enough of US “war on terror” in Afghanistan. If Pakistan stop the US supply lines through Pakistan, the US must stop the endless and unwinnable Afghan war. IF the US evacuate its soldiers and its Afghan proxy government. This will bring stability to the region.
Pakistan and Bangladesh have given away lucrative businesses to foreign companies. The Norwegian phone companies in Bangladesh and Pakistan is very profitable. 1/3 of the revenues is operating profits. While Pakistan struggle, the super-rich Norwegians get the profits. Telenor is an alleged CIA front. For national security reasons important communication infrastructure should not be owned by foreign entities. Telenor is forced out of India and Russia. In other Asian countries they have caught interfering in domestic politics.
Corruption too is a problem that need to be addressed. The Saudis and China should assist Pakistan with loans, since the US, once again has betrayed and insulted Pakistan.
Defense proposed budget is nominal as compared to so many countries in the world. Military needs far far more than the said amount to counter enemy who is operating on both eastern and western borders. India is openly funding terrorists on the western borders through Ashraf Ghani the puppet president of Afghanistan and is continuously violating the cease fire agreements over LOC. Linking of defense budget with so called religious outfits is a food joke, in reality ISI has to counter the terrorism spread by India through proxies and for that too the alocation is just marginal compared to that of RAW’s sending to destabilize Pakistan.
Free trader Mohammed defeated his Meccan Demos – big business Umayyads, bankers Banu Abbas, and trade monopolist infidels to set up Medinan Republic. When he died in 632, his followers reversed the Revolution, setting up a trade monopolist Kaliphate.
Kaliphate milked East-West Silk Road trade with Tariffs (Arabic word), making a habit of living off others. Ever since then they have been the most troublesome of Toynbee’s 5 living civilizations today (Hellenic West, Christian Russia, Islam, Sinics, Indics).
Over their first 1,000 years and later the Kaliphate Muslims put their fingers behind the asses of one and all – keeping West at war, looting Indics, de-populating Christians.
But the Sinics were the only one who put Sunnis in their place. In 1258 Mongol Khan decapitated Sunnidom destroying its capital Baghdad, burning libraries, razing madressahs with priests, killing populace. Only Shia pleading saved the too old and too young Sunni males from extinction.
Then in 1399 Timurlane laid Sunni India to waste. Again the Shia pleaded on Sunni behalf.
The English Raj extinguished Sunni Mughal Empire. Later, a Shia Jinnah saved Indian Sunnis neck by pleading the English for Pakistan.
But the Kaliphate loving Sunnis never learn, continue their nefarious ways. The scenario now repeats in Pakistan. Already 50,000 strong Chinese are destined to grow to 500,000 there, investing $60 Billion in CPEC. With history as guide, Sunnis are doing their usual – kidnap Chinese for ransom, steal their assets, hoodwink them, loot them.
Soon, the enraged Sinics will react, especially when they see their racial brothers Shia Hazaras, Shia Gilgitis, and Shia Baltistanis being mistreated by Sunnis. Blood is thicker than water.
Lament for a people who do not know how to live with others, or even with themselves.
Very correct sir. I salute your forthrightness.
It is good to see some educated Pakistanis defending the heavy military expenditure which has left very little money for development.
They don’t understand that Pakistan do not have monopoly over "bleeding through thousand cuts". What if, Pakistan has a very strong military but no war to fight. Their economy will collapse and it will be a victory without bloodshed for India.
Fittay Munh Shakil
Pakistan need a strong military to fight all the problems related to the US “war on terror” has created in Pakistan. The military, ISI, and the politicians must close the US supply lines through Pakistan to end the war in Afghanistan and bring stability to the region.
India and Pakistan have many grievances, that can be resolved diplomatically, but it seems, India does not want to talk about the Kashmir conflict. The risk for a war between India and Pakistan is always there, but the Pakistani nuclear arsenal will make it a suicide mission for India to be aggressive against Pakistan.
Increased cooperation with China will give job opportunities and trade. It is of utmost importance to reduce unemployment, poverty, and corruption. An economic collapse must be avoided at all costs. Economic collapse will increase extremism. If the democratically elected government and the military jointly is in charge, the Pakistani nukes is safe.
Falk Rovik Very optimistic plan. Pakistan does not need tactical nukes and associated expenses to fight terrorists.
Pakistan can’t block USA otherwise it will face more strict sanctions.
India need not go to full scale war with Pakistan. Only keeping the border hot and putting Pak army in constant deployment would be enough to bleed their finances.
In my opinion, the entire CPEC deal from Chinese PoV is about access to Gwadar. The power plants and other industries are just sweetner for the actual part. China will never go to war for Pakistan particularly against USA or India. This will seriously harm their own economy.
Conclusion: Pakistan should only play the game at its level. Having nukes will not bring it to the league of nations like India or anyone in G20.
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