0

[ Editor's Choice - The Nation ] - Strong economy begets strong defence

In print and electronic media, some economists and politicians often express their concern that the military consumes 70 percent of the budget and hardly anything is left for social sector allocations.

There is a raging debate about which of the two is more important - economy or defence?

In reality, both are inter-related. It is true that a strong economy begets strong defence; however, conversely, it is true that a strong defence makes it possible to ward off internal and external threats, which creates climate conducive to investment. Having said that, Pakistan’s stance on Kashmir cannot be undermined at any cost, as our agriculture depends on the rivers that flow from the Indus Basin situated in the Indian Occupied Kashmir. In view of hostile neighbours on both the eastern and western borders of Pakistan, no one in his senses would suggest reduction in the defence budget, since our survival hinges on a strong defence. The focus should, therefore, be on controlling corruption and rationalising the cost of doing business with a view to increasing economic growth and thereby generating revenues to meet the defence needs. While addressing the media at the Shahbaz Airbase, Chief of Army Staff General Ashfaq Parvez Kayani said:

“The Pakistan army is criticised for consuming a large part of the country’s annual budget.”

And clarified that the country’s defence budget is only 18 percent and not 70 percent. “Even out of that paltry 18 percent only 8 to 9 percent of the funds trickle down to the sentinels of the country, which was a matter of serious concern,” he maintained. According to 2011-12 budget Rs 495.2 billion were allocated to defence, out of which “Rs 206.4 billion is for employee-related expenses, Rs 128.2 billion for operating expenses, and Rs117.5 billion for physical assets” - military hardware etc. In fact, allocation for debt servicing - payment of interest and instalments of loans - amounted to Rs 1034 billion. So, the defence allocation is less than 50 percent of single largest allocation for debt servicing. In budget 2011-12, total receipts were estimated Rs 2732 billion - tax revenue Rs 2074 billion; non-tax revenue Rs 658 billion; thus allocation of Rs 495.2 billion for defence is exactly 18 percent of budgeted receipts. It is true that Pakistan is facing economic challenges and fiscal deficit, trade deficit and current account deficit. The major problem is energy shortfall, prohibitive cost of energy and deteriorating law and order situation, which have made many industries unviable, and new investment is not forthcoming. In the last budget, the government reckoned 4.3 percent economic growth, but that was hardly possible with loadshedding for 12 hours a day.

Against this backdrop, one cannot envisage to surpass the last year growth figure of 2.4 percent.

In real terms, there is going to be no growth in the current year because of an increase in population, as the small growth is nullified with the increase in population. It has to be mentioned that for higher growth there has to be sizeable increase in investment. The present rate of savings to GDP is around 14 percent, which is lower if compared with the developing countries and emerging economies. To give a boost to the economy, the investment ratio to GDP savings should be 20 percent of the GDP, and even more when foreign investment has declined. Pakistan and the US being at loggerheads, the chances of aid from any quarter are slim. It is an established fact that the country cannot sustain a strong army with weak economy, since it has to rely on foreign loans and aid, and it is because of dependency syndrome that Pakistan has to buckle under pressure, as it did after 9/11. However, the most serious aspect of our dire economic situation is the growing public debt, which on the one hand limits the capacity to build strong defence and on the other, limits fiscal space to invest in human development and infrastructure. The threats faced by Pakistan have to be understood in the light of fast changing regional and international situation, which add urgency to revive the economy so that adequate resources could be allocated to counter them. The government should, therefore, restructure the public sector enterprises, control wastages, corruption, loot and plunder, which is estimated around Rs1000 billion per year. Last but not the least, tax evasion should be controlled, all tax exemptions should be withdrawn, and agriculture sector should be taxed.

The writer is a senior journalist and freelance columnist. Email: mjamil1938@hotmail.com

The Editor found it an interesting read for the people following economy of Pakistan in particular and developing world in general.Hope you enjoy it.