Pakistan’s military budget expansion amid economic uncertainty

New Delhi; 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.