Originally published at : https://www.ndtv.com/opinion/the-imf-shaped-irony-in-pakistans-massive-defence-budget-hike-8682554
Pakistan’s trial by fire is here. After delaying the announcement of the budget for weeks together, there was no putting it off any longer. Not just the budget, but also the Economic Survey, and within all this, the allocations for the armed forces. That last bit is particularly interesting at the moment, since it should give an idea of the losses suffered by them during Operation Sindoor. But the Pakistani defence budget retains its opacity. Neither the International Monetary Fund (IMF) nor the Financial Action Task Force (FATF) has been able to persuade Pakistan to be a little more transparent to its own people.
General Asim Munir got his lifetime rank of Field Marshal, but the question that arises is what Pakistanis have to pay for it.
The Economic Survey
Taking a quick look at the Economic Survey itself is an exercise of going past duplicity to get at the realities. For instance, the fact that the fiscal deficit has remained at 6% of the GDP (Gross Domestic Product) for more than a decade means the simple fact that the country has to continue taking loans to pay off the interests of previous loans. Remember, Pakistan has been going to the IMF since 1958, with the present bailout being its 25th. As previous finance ministers have pointed out, the deficit is reduced by steadily trimming the government’s developmental spending. In other words, Pakistanis are getting far less bang for their borrowed buck.
A second issue is how to increase revenue, which, in simple terms, is the purse that the government has to draw upon. The IMF, in its latest report, has warned against tax exemptions, including in retail, while in Pakistan, much of this is hidden in land acquisitions. It emerges that the cost of this has risen by PKR 2 trillion to a total of PKR 5.8 trillion. This despite the Board of Revenue trying to increase the tax base. Clearly, the rich landowning classes voting for the present government and the huge landholders in the military don’t like paying up.
Even as agriculture stalls with a mere 0.56%, the point of this whole thing is that where Pakistan once had a growth rate of 7% in the mid-1980s, today it has slowed down to a mere 1.6% in the last three years. Note that this is the period from when the country started to back terrorism, both to the east and the west.
Defence Allocations
Now for the defence budget. The allocation of PKR 2.55 trillion, a jump of 20%, is the highest in a decade, at 1.97% of GDP. That is just about within the mandated IMF limits. But add to that some PKR 742 billion in military pensions, and the IMF is left standing at the post. The army gets the lion’s share of the budget at about 45.5 per cent, while the air force and navy get about 20 and 10 per cent each. Meanwhile, the armed forces’ pay has been increased.
This has to be seen against the sharp cut to expenditure on health, from an estimated PKR 52 million to PKR 31 million, and the complete wiping out of the section on environment protection. The IMF, in fact, has allotted SDR 1 billion for a Resilience and Sustainability Facility (RSF). So, this is puzzling.
Also noteworthy is a huge rise in civil works, physical assets and operating expenses. In the last two cases, that’s a jump from PKR 257,000 million to 336,000 million, and 550,000 million to 663,077 million, which could account for repairs to runways and hangars after Op Sindoor.
What is hidden still are the costs of replacing those aircraft within hangars that were hit at at least three locations (Bholari, Jacobabad, and Sukkur), with unknown numbers or types of aircraft inside. Those costs alone could be in trillions.
All this is hardly in the spirit or letter of the IMF, which based its report on much-needed fiscal prudence, stipulating in one of its 50 conditionalities that Parliament should be consulted on the entire budget.
The reaction of Pakistan was predictable. It approved a five-fold increase in the salaries of the Senate Chairman and National Assembly speaker, months after an increase of 138% in the salaries of lawmakers. The hike, with retrospective effect, became effective in January 2025.
The ‘India’ Citation
All this was allowed by the IMF since the team was in the country at the time. Also notice that the grouping has made no objection to the huge hike in defence expenditure due to possibly ‘rising tensions’ noted in the document. It only sagely observes that “Pakistan’s outstanding debt to the Fund as a per cent of gross international reserves is above the 75 percentile of comparator countries. The three flow indicators (i.e., debt-service to the fund as a per cent of government revenues, exports, and gross international reserves) …indicating significant risks”. It seems the IMF has been ‘persuaded’ very strongly by the Pakistan army, with the clinching argument being that war with India has increased dangers.
It seems, therefore, that the Pahalgam strikes have delivered multiple deliverables: the testing of Chinese equipment, the army’s image transformed, for now, from thieves and knaves to that of ‘saviours’ of the nation, Gen Munir’s field marshal rank, and, most importantly, the United States again hyphenating India and Pakistan.
The cherry on the top for the Pakistan military is this: it got the IMF to allow an unprecedented rise to the defence budget, citing the ‘India’ threat. Chew on that. Time to think about what lies beneath – and ahead. Nothing in life is free, as General Munir might find out as he visits Washington
