Cash Starved Pakistan Spends Big On Military Despite Financial Meltdown
New Delhi, June 13: Cash starved Pakistan, which is negotiating with the International Monetary Fund for a bailout package, has increased its defence budget by 11% for financial year 2022-23, against the (Pakistani) Rs 1,370 billion budget estimate for this financial year, closing this month.
Karachi-based newspaper Dawn said that defence expenditure is budgeted at Rs 1,523 billion, which makes up 17.5 per cent of the total current expenditure.
What is worrying is that the country’s allocation for Higher Education Commission is a mere Rs 65 billion for 2022-23.
Not just that. It has reduced the allocation for the federal and provincial Public Sector Development Program (PSDP) at Rs 727 billion– down 19.2 per cent from last year’s budgeted amount of Rs 900 billion.
Though PSDP alone cannot boost the country’s economy, a reduction in allocation could lead to slowing down of public investment denting manufacturing and overall competitiveness, an analyst with a ratings agency told India Narrative.
The PSDP is the apex development-sector portfolio funded by the government.
According to Pakistan Institute of Development Economics (PIDE), more than 80 per cent of the PSDP funds go towards infrastructure-led projects. The Karachi based think tank, however, said that the PSDP needs an overhaul to be more efficient.
It added that the projects and programmes under PSDP must be designed in a manner that they boost economic growth.
“It is clear that the country’s development sectors have taken the hit. Though there are huge leakages in PSDP projects and they have not delivered any impactful results, Pakistan needs structural changes if it wants to steer the country out of this economic mess,” he said.
Amid high inflation and uncertain economic landscape, in June, ratings agency Moody’s downgraded Pakistan’s outlook from “stable” to “negative” indicating that the country’s current account deficit – the difference between the inflow of foreign currency and outflow– will continue to be under pressure in 2022-23 amid high import bills on commodities. Islamabad’s trade deficit also rose by a whopping 58 per cent during July-May period.
After the budget was presented, Pakistan Prime Minister Shehbaz Sharif tweeted, “These are difficult times brought upon us by recent years of economic mismanagement. Through this budget, my govt will steer our way out of these challenges by taking tough decisions while minimising impact on vulnerable segments of population.”
Meanwhile, Pakistan’s Finance Minister Miftah Ismail said that the IMF still has some concerns over the budget.
The IMF has already asked Islamabad to renegotiate energy deals under China Pakistan Economic Corridor (CPEC). While negotiating with the IMF, Pakistan has also been talking to its allies including China, UAE and Saudi Arabia for financial assistance. However, the bilateral lenders have adopted a wait and watch policy. They are unwilling to disburse any loan until Islamabad receives the IMF bailout package.
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