February 13, 2023
IMF demands 20% cut in Pakistan’s defense budget
By Abdus Sattar Ghazali
The International Monetary Fund’s 9th Review for nuclear Pakistan remained inconclusive as the government kept hoping for the announcement from the IMF for the release of a much-needed $1.1 billion tranche from a $7-billion bailout package.
The IMF delegation left Pakistan on February 9, after ten-days of inconclusive talks.
With the International Monetary Fund (IMF) and Pakistan facing a deadlock over key issues, the international creditor has told Pakistan to cut down its defense expenses to resume a stalled loan programs.
The stand-off and deadlock came after Pakistan officials declined the condition of a cut in defense budget of 10%-20% as committed in earlier talks, according to media reports.
At present, Pakistan’s 50% of the national budget is consumed by debt servicing, followed by 26% on military.
In 2022, the government of Pakistan allocated $9.5 billion to its total defense budget. However, total military spending is not reflected in these figures, as they omit procurement under the Armed Forces Development Program, pensions and other military expenditure.
The Stockholm International Peace Research Institute, a Sweden-based think, found that Pakistan’s military-related expenditures for 2021 came to $11.3 billion.
Sri Lanka to slash armed forces
Not only Pakistan but the IMF had also asked the Sri Lankan government to slash its military budget. On January 13, Sri Lankan defense ministry announced it would slash its budget and cut army by half.
According to the Sri Lankan Ministry of Defense, the move will see the Sri Lankan Army shrink to 135,000 by next year from 180,000. It will then further cut down to 100,000 by 2030.
Defense accounted for nearly 10 percent of public spending last year, and according to expert analysts, pay for security force personnel makes up half the government's salary bill.
The island nation is still reeling from months of food and fuel shortages that made daily life a misery for its 22 million people last year.
President Ranil Wickremesinghe has hiked taxes and imposed harsh spending cuts to smooth the passage of an expected International Monetary Fund bailout following a government debt default.
The crisis peaked in July when protesters angered by the crisis stormed the official residence of then-president Gotabaya Rajapaksa, who briefly fled the country and tendered his resignation from abroad.
Egypt: Sisi vows to curb army influence in new IMF bailout
Tellingly, Egypt's President Field Marshal Abdel Fattah Al-Sisi has vowed to reduce the military's undue influence over the country's economy as part of a new $3 billion International Monetary Fund (IMF) bailout.
A recent report on Cairo's economic crises under Sisi shows that Egypt's foreign debt has risen to $157.8bn, and foreign exchange reserves declined to $33.141bn as of August 2022. The total public debt during the Sisi era stands at 130 per cent of GDP.
Details of a statement issued by the IMF on January 10, reported the Financial Times, said that Egypt had agreed to "critical" structural reforms that included "leveling the playing field between the public and private sector" as part of a state-ownership policy endorsed by Field Marshal Sisi. The fund said that the policy would cover all state-owned enterprises, including "military-owned companies", in what is said to be a rare acknowledgment of how the army has expanded its footprint across Egypt's economy since the former general and defense minister seized power in a 2013 coup.
Pakistan's military-run enterprises
Not surprisingly, Asia Nikkei reported in July 2022, the military's dominant role in the economy must be curtailed if Pakistan is to achieve sustainable growth. But well-meaning as they might be, these efforts have consistently failed to date, meaning that Military Inc. continues to be the dominant player in Pakistan's economy, according to Uzair Younus, the director of the Pakistan Initiative at the Atlantic Council's South Asia Center.
Pakistan's military began playing a role in the economy soon after independence. The construction of the 805-km cross-border Karakoram Highway in the Himalayas was a major inflection point. The Frontier Works Organization was formed then with the mission to construct the highway on the Pakistani side.
Today, military-run organizations have their tentacles spread across the entire economy, with the military-owned Fauji Foundation being one of the largest conglomerates in the country. The government has exempted both the Army Welfare Trust and the Fauji Foundation from income taxes, giving them an edge over privately owned companies.
To emerge from this crisis, Pakistan's military must learn from its strategic ally China. While the Chinese regime also began with military-run organizations developing public infrastructure, over the decades, it has developed companies that have a more global outlook, according to Uzair Younus.
In addition, China focused on improving quality by leveraging technology while also investing in global best practices. This ensured that the country built globally competitive businesses that enhanced China's technological reach, such as telecommunications group Huawei Technologies.
The experience of the last few years shows that there is, at least in the near term, no political party capable of challenging and dislodging the military from its dominant role in Pakistan, Uzair Younus concluded.
Implications of IMF demand
What are the implications for Pakistan of IMF’s demand to slash military budget by 10 to 20%. According to Global Fire Power, Pakistan has 654,000 active personnel in the Army. Many analysts in Pakistan are speculating, like Sri Lanka, Pakistan may be forced to cut down its standing armed forces?
It is an open secret that the IMF and the World Bank are pawns of the United States to control and manipulate economies of the developing countries. What is happing in Pakistan is an acute economic and political chaos in the aftermath of installation of a US-client government in in April 2022 in nuclear Pakistan. Apparently the objective of IMF (read the US) is to force Pakistan to continue the so-called liberal economic policies irrespective of it national interests and suffering of its people.
Abdus Sattar Ghazali is the Editor -in-Chief of the Journal of America.
|
Published since July 2008 |
Your donation
is tax deductable.
The Journal of America Team:
Editor in chief:
Abdus Sattar Ghazali
Senior Editor:
Prof. Arthur Scott
Special Correspondent
Maryam Turab
