Bankrupt Pakistan to spend over Rs 1.8 trillion on defence this year

As part of a budget for 2023–2024 that was unvelied on Friday, cash-strapped Pakistan increased defence spending by 15.5 per cent and allotted more than Rs 1.8 trillion as it fought to avoid a potential default caused by declining foreign reserves.

The budget was presented to the National Assembly, the lower house of parliament, by Finance Minister Ishaq Dar, who stated that the government intends to aim for a growth rate of 3.5 per cent in the upcoming fiscal year.

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In the midst of political unrest following the removal of Imran Khan as prime minister in April of last year, Dar said that this budget should not be seen as a "election budget" but rather as a "responsible budget" as the political parties prepared for the upcoming general elections.

Dar delivered the government's final budget before the general elections later this year in front of the National Assembly, the lower chamber of parliament.

According to him, Rs 1,804 billion has been suggested for defence, which is more than the Rs 1.523 billion allotted the previous year. Defence spending, which accounts for around 1.7% of the GDP, has increased by 15.5 per cent over the previous year.

The debt payments, which will total Rs 7,303 billion in the upcoming year and represent the nation's largest single expense, are the largest component of the yearly expenditures, followed by the costs associated with the defence industry.

The minister declared a 3.5 per cent GDP growth target for the next year, which is a moderate target. “This budget should be treated as a development-oriented budget instead of an election budget,” he said.

According to him, the budget deficit for the upcoming fiscal year would be 6.54 percent of GDP and the inflation target would be 21%. The export goal, he stated, would be Rs 30 billion, and the remittance goal, Rs 33 billion.

The objective for tax revenue collection, according to the minister, is Rs 9,200 billion, of which Rs 5,276 billion will be distributed to the provinces in accordance with a predetermined formula. He predicted that the federal government's non-tax revenue goal would be Rs 2,963 billion, translating into Rs 6,887 billion in net income.

Dar stated that the net spending will be Rs 14,460 billion and that external funding would be used to close the gap of Rs 7,573 billion. He stated that Rs. 714 billion would go into civil administration and Rs. 761 billion would go towards a pension fund for former civil and military employees. In order to pay for the rising cost of pensions, the government also made the decision to establish a pension fund.

A historic Public Sector Development Programme (PSDP) worth Rs 1,150 billion will also be provided by the government, and the province portion of the development budget would be worth Rs 1,569 billion, bringing the total amount of development spending up to a total of more than Rs 2,700 billion.

According to Dar, the government decided to set aside Rs 2,200 billion for agricultural loans and Rs 30 billion for solarizing water pumps. Other initiatives to boost the per-acre production of various crops were also mentioned by him.

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The minister also outlined a number of initiatives to strengthen freelancers' ability to advance the IT industry and increase IT exports. Additionally, Dar stated that the IT sector will be given better tax treatment and will be considered a Small and Medium Sized Industry. He also offered incentives for overseas Pakistanis to send more money to the country as the government set a USD 33 billion target for foreign remittances.

By raising pay by 30 to 35 per cent, the government also announced significant assistance for employees.

Earlier, he attacked Khan's former administration for "laying economic landmines" for the succeeding administration by wrecking the nation's economy. “The former Pakistan Tehreek-e-Insaf government is responsible for the current difficulties faced by the common people,” he said. 

The International Monetary Fund (IMF), which has been stuck in a deadlock, faces dwindling possibilities of revival as the USD 6.5 billion aid package agreed upon in 2019 is set to expire on June 30. Before releasing USD 1.1 billion, the fund has stipulated that the government must adhere to stringent requirements.

There is increasing agreement among analysts that Pakistan will find it nearly hard to avoid default without a resumption of the IMF programme or a fresh bailout package in the upcoming fiscal year.

The government will be able to access several multilateral and bilateral loans if the donor releases the anticipated tranche of the current loan, according to Prime Minister Shehbaz Sharif.

In a nation that has experienced military coups and the overthrow of elected administrations three times since independence, the economic position has never been so dire.

Cash-strapped Since many years ago, Pakistan's economy has been in a free slide, putting enormous pressure on the underprivileged masses through unbridled inflation and making it nearly difficult for a large number of people to make ends meet. After the disastrous floods of last year, which claimed the lives of more than 1,700 people and resulted in enormous economic losses, their problems multiplied.