IANS Analysis: Pakistan's military budget expansion amid economic uncertainty

New Delhi, June 26 (IANS) Pakistani Finance Minister Muhammad Aurangzeb presented the country’s 2024-25 annual federal budget amidst economic uncertainty on June 12. With a total of PKR 18.99 trillion ($ 67.84 billion), the government emphasized several reform measures aimed at meeting International Monetary Fund (IMF) conditions ahead of seeking a new bailout package. While key spending areas saw minor adjustments reflecting IMF directives and economic realities, there was a notable rise in defence spending, potentially diluting efforts to revive the economy in a piecemeal fashion.
The federal government has proposed a substantial PKR 2.12 trillion allocation for the armed forces in the upcoming budget starting July 1. This represents a notable increase of 17.6 per cent from last year’s 15 per cent rise to PKR 1.80 trillion. This also marks the second-largest percentage hike in defence allocations, slightly below the 18 per cent increase during the 2017-18 fiscal year under the previous PML-N government led by Nawaz Sharif.
Despite accounting for 1.7 per cent of the GDP, consistent with the previous year, this figure has sparked debate, with some highlighting it as a sign of military austerity amidst economic challenges, while others argue it marks a significant overall increase of nearly 18 per cent in annual allocations.
The allocation of financial resources within the Pak armed forces reveals that the Pakistan Army receives 47.5 per cent, followed by 21.3 per cent for the Pakistan Air Force, and 10.8 per cent for the Pakistan Navy. Additionally, 20.3 per cent is allocated to Pakistan’s Inter-Services Intelligence (ISI) and associated organizations. This distribution underscores the significant influence of the Pak Army and its affiliated inter-services entities, which collectively control nearly 68 per cent of the financial resources. This allocation also reinforces the Army’s predominant role within the military establishment and its broader impact on government affairs.
However, the actual allocation to the armed forces exceeds what is officially reported, as certain expenditures are categorized under different budget headings at the insistence of the military establishment, underscoring its significant sway over government decisions. This distinction is evident in how expenses for current servicemen, including salaries and welfare allowances totalling PKR 827 billion (39 per cent of the defence allocation), are included in the defence budget. Meanwhile, financial provisions for pension payments to retired servicemen are sourced from the general national budget rather than the defence allocation. Overall, defence spending surpasses 15 per cent of Pakistan’s total annual budget.
Consequently, Pakistan’s government allocated an additional PKR 662 billion from its current expenditure to cover pension and welfare needs for ex-servicemen. This amount, equivalent to nearly 31 per cent of the annual defence allocation, is not formally included in the armed forces’ budget. This approach may be intentional to obscure the true scope of defence spending and avoid public scrutiny. Combined, expenses for both current and former servicemen total PKR 1,489 billion from the state treasury.
This situation prompts inquiries into the military’s significant influence over Pakistan’s financial resources and, consequently, its influence over daily governance. The military leadership’s demand for government funding is striking, especially considering the extensive economic interests across various sectors maintained by all three branches of the armed forces, led by the Army. Pakistan’s armed forces manage a diverse portfolio of multi-billion-dollar economic enterprises, spanning construction, manufacturing, real estate, telecommunications, shopping complexes, and other sectors.
Various estimates indicate that Pakistan’s military conglomerate, encompassing entities like the Fauji Foundation, Shaheen Foundation, Bahria Foundation, Army Welfare Trust (Askari group), and Defence Housing Authority (DHA), generates an annual revenue of $26.5 billion as of 2023. According to the Pakistan government’s Senate submission, the Fauji Foundation owns diverse entities such as Askari Bank, Foundation Gas, Seed Multiplication Farm, Fauji Fertilizer, Fauji Cement, Fauji Power, Foundation Securities, Fauji Meat, Fauji Foods, and Overseas Employment Services, along with numerous shopping complexes nationwide.
Despite Pakistan’s economic challenges in recent years, these military enterprises have experienced significant growth. For instance, the assets of the Fauji Foundation alone reportedly surged by 78 per cent between 2015 and 2017, as per Bloomberg.
Likewise, the Shaheen Foundation oversees 21 projects, encompassing FM 100 radio, Shaheen Airport Services, SAPS Aviation College, Shaheen Aerotraders, Shaheen Knitwear, Shaheen Medical Services, Shaheen Insurance, Hawk Advertising, and two shopping complexes in Karachi and Lahore.
Meanwhile, the Bahria Foundation manages eighteen enterprises across Pakistan, including the Bahria Transshipment Hub, Bahria Enterprise Systems and Technologies, Bahria Dredging Company, Maritime Technical & Support Services, Bahria Maritime Services, Bahria Travels, Bahria Pharmacy, Al-Falah Trading Agency, Bahria Filling Stations, and Sino-Pak Refinery.
Additionally, the Army Welfare Trust (AWT), managed by the Pakistan Army as the Askari group, oversees several business ventures such as Askari Insurance, Askari Aviation, Askari Airport Services, Askari Travels, Mobil Pakistan, AWT Investments, Askari Enterprises, Army Welfare Sugar Mills, Askari Guards, Askari Woolen Mills, Askari Shoes, Askari Fuels, and Askari Real Estate. Moreover, the Defence Housing Authority (DHA) has developed eleven residential estates in major Pakistani cities including Islamabad, Lahore, Karachi, Peshawar, and Quetta.
What sets apart these military enterprises from private and government entities is their exemption from state oversight mechanisms. Parliament rarely scrutinizes the military budget or audits its expenditures. Civilian administrations have consistently faltered in holding the military accountable for its business interests, largely due to deficiencies in the administrative framework.
Exploiting these loopholes, the military has entrenched itself as a parallel authority in politics and economics, operating free from civilian supervision. The compromised political elite, vying to serve as a facade for military-dominated governance, further complicates this dynamic.
Thus, while ostensibly aimed at supporting the welfare of service personnel, the profits earned by the military’s corporate entities benefit shareholders and managers, many of whom are current or retired army officers. Instead of directly enhancing the armed forces’ welfare or easing the state’s economic obligations, these businesses primarily serve the personal financial interests of military leaders. Meanwhile, they continue to receive substantial government funds earmarked for the armed forces’ welfare expenditures.
The Pakistan military’s significant utilization of vital financial resources, both through budgetary allocations and other channels, facilitated by its collaboration with civilian authorities like the Shehbaz Sharif-led PML-N government, severely hampers the country’s economic recovery efforts.
The operational dynamics of the military underscore the urgent need for Islamabad to acknowledge that expanding military budgets pose challenges in defining and limiting the military’s appropriate role in national affairs.
–IANS
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