What do Pakistanis need to know about the defence budget?

AS: That more than a fourth of the federal budget goes into defence. Neither the public nor the parliamentarians know the details. There is no debate in parliament or any other elected body about how and what we spend on defence.

SS: A lot more. What’s the actual size would be a start? But this year there has been a break from the past. The budget itself is not as large as people make it out to be. And the people who make it out to be larger than it actually is is evidence of them having an axe to grind with the concerned institution. This is a cop out. Everything for defence, combined, is twenty eight percent (28%) of our total budget. That’s three and a half percent (3 ½%) of total GDP.

Forget partisanship. What’s the dispassionate word of an economist on defence expenditures?

AS: It is not transparent at all. There is no transparency. Sure, there is a little more detail than four years ago, but nothing beyond that. It’s an obfuscation of the use of public resources. Even within the budget there are ways in which it is hidden. There are some ways we know about. The others we don’t.

Last year, PKR 100 bn were captioned as “contingent liabilities”. Those in the know said it was military expenditure. That’s a pretty hefty amount.

Partly, one explanation would be that this was a way of covering up for the stalled CSF payments. But the amount is much larger than that.

Ahmad Rashid wrote in his book “Taliban” that a lot of the intelligence budgets came from the Presidency. So does that mean the Taliban are being run by president’s kitchen?

There is another interesting stat. Last year, the total pension allocation was ninety-six billion (PKR 96 bn), of which military pension was seventy two billion (PKR 72 bn). The actual numbers released in this budget have military pensions over a hundred billion (PKR 100 bn). Why?

SS: It’s a pretty neutral issue. There is always going to be a national security component in any sovereign’s budget, especially any sovereign that faces a national security threat. The issue is not large allocations. The issue is spillovers, of externalities of the military itself, about how the economy is run.

For example, a capital gains tax on real estate has been stopped by the largest developer in the land, which is the Army. That’s damaging to the economy. Also, we have a huge problem in smuggling, and the discrepancies that come with it, on our borders, mostly through the Afghan Transit Trade. But the borders are manned by the Army, or the Rangers or the Frontier Corps. Smuggling continues under their watch, perhaps through deal making. Thus the negative spillovers into the larger economy by the army need to be watched.

But isn’t defence the ultimate priority in a country at war?

AS: This country went to war a month after being founded. It wasn’t exactly defending itself. That’s been a trend. Any country can choose to make defense a priority. But we don’t see other countries doing that. Enough has been written about how the security state here has been created - the four martial laws, the army being built to take over pretty much anything.

SS: Defence is a priority, but not the ultimate priority. That’s our big mistake and our hard lesson. We should have been a development state, not a security state.Butits also a a lack of competence in the last few years that we haven’t moved in the right direction. That’s an issue of immediate needs that governance, or the lack of, has failed at. Remember that classic quote by Martin Luther King during the Cuban Missile Crisis: “We have guided missiles, but not guided people.”

Why the ‘fuzzy math’ bit?

AS: There’s no fuzzy math here. A lot is right up front. Everything in the budget is debated in parliament. Everything except this. The last time it happened was in the mid 1950s, before Ayub Khan became Defence Minister. Since 2008 there have been some changes, the most recent one this year. Now we have numbers about what the three services get. The Army in this case is like the Punjab. It gets everything. The Navy, which receives the least, is like Balochistan.

SS: Because the Ministry of Finance works on a need to know basis, and for them the people of Pakistan don’t need to know anything. But this year there is more transparency on hardware, on salaries, on operational expenses, on civil works.

What are the best approximate numbers?

AS: There are three categories of the budget. The pensions are around seventy-two billion (PKR 72 bn). “Contingent Liabilities” are one hundred billion (PKR 100bn). We don’t know what this is heading (contingent liabilities is), but it may be a number of things, from debt servicing by the army itself, or efforts to fill the gap for the Coalition Support Fund vacuum). The declared budget itself is around five hundred billion (PKR 500 bn).

SS: The main line item is going to be close to seven hundred million (PKR 700mn)

How’s the pinch going to feel considering the Americans have plugged and played and then plugged again at the Coalition Support Fund system?

SS: The CSF narrative has been very disingenuous form the American point of view. Washington has conflated CSF with assistance. But it’s not assistance. It’s reimbursement. From causalities to bullets. That hurts the army, which is operationally committed on the ground. The CSF is how the army pays for its operations. It’s as simple as that. Keep in mind that the CSF block on payments leads to a devalued rupee as around six hundred million dollars (USD 600mn) are injected every year into the system. Imports cost less for fuel and hardware if dollars come in. There’s a direct impact on both the economy and the war there.

And the bottomline of defence spending?

AS: The issue is not whether it’s too much or too little. The issue is that we don’t know about it. Without any debate or assessment, and relating it to threat perceptions or thresholds, we may actually want this to increase. There is no reason for the obfuscation. The problem is that if everyone and their grandmother is held accountable in Pakistan, why are the boys sitting pretty with their toys.

SS: Transparency is critical. Civilians should have oversight of the budget. Maybe the part about our Strategic Plans [military division tasked with the nuclear arsenal] should be reported to a select committee, but transparency should exist for you and I. It doesn’t even exist for even those more powerful than us. If the parliamentarians don’t have access, we have a problem.

The writer is a senior reporter for TFT. Reach him via @wajskhan on Twitter or wajahat_khan@hks.harvard.edu

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Commenting on the Armed Forces budget will be injurious to one's health

Posted: Saturday, June 09, 2012 by Tarik Rashid from Karachi