Islamabad:
Pakistan can further increase the proposed defense budget for the next fiscal year to deal with Indian aggression and spend more on indigenous investigation and development, in a movement that may also require provincial governments to share the additional cost.
Official sources told Express PAkGazette that, due to the rapid developments related to security, the authorities in question have begun to consider whether the previous agreed increase of 18% in the defense budget for fiscal year 2025-26 will be sufficient.
The issue has been discussed at the level of the Ministry of Finance, the Ministry of Defense and also with the International Monetary Fund, sources said.
While answering a question if Pakistan asked the IMF to allow a greater increase in the defense budget and compensaten it downward the objective of primary budget surplus agreed, the Minister of Finance, Muhammad Aurengzeb, replied that “we remain committed to maintaining the course both in terms of structural reform agenda and in all quantitative and structural comparisons.”
On May 10, the Federal Government had decided to give a 18% increase in the defense budget on last year’s assignment of RS2.1 billion. This has also been agreed between the Popular Party of Pakistan and the Nawaz of the Pakistan Muslim League during a meeting chaired by Prime Minister Shehbaz Sharif.
However, the IMF had indicated RS2.42 billion for defense spending for the next fiscal year, which was higher in just 12%.
The sources said that the IMF did not have a problem with the increase in the defense budget, provided that the government has a fiscal room to finance it without compromising the objective of primary budget surplus of around RS2.2 billion or 1.7% of GDP.
The discussions are carried out at a time when the highest man of the IMF for the region, Jihaz Azour, was in Islamabad. Jihad celebrated important meetings on Wednesday, even with finance minister, Muhammad Aurengzeb, and some with other state high profile dignitaries, the sources said.
Jihad is also scheduled to meet today with the prime minister (Thursday).
The sources said that in order to meet the greatest security situation, it was necessary to increase the defense budget in at least a quarter. This would require a jump of around RS500 billion on this fiscal year, which was necessary to replace the arsenals. The sources said that additional money was also needed for the Armed Forces Development Program and eliminating some liabilities related to past defense.
For this fiscal year, RS270 billion had been assigned for the Armed Forces Development Program, which may have to significantly increase in the light of regional developments, the sources said.
Additional financial needs to consolidate the country’s defense must be assumed by the provinces. In a meeting with the Prime Minister a few days ago, the Minister of Petroleum, Ali Pervaiz Malik, had proposed that provincial governments should support at least half of the additional cost of defense. The provinces are rich and have huge cash surpluses, while the federal government is in deficit.
India attacked the provinces of Punjab and Sindh and there is a need for the provinces to now have the cost, government officials told.
The Ministry of Finance was also considering diverting some of the unproductive subsidies to meet the additional defense budget needs of the Nation.
During one of the recent meetings, the IMF Mission Chief pointed out the allocation of more than RS1 billion for energy sector subsidies even though electricity prices have dropped. But the power division was asking for more money, the sources said.
The Ministry of Finance can also divert some of the unproductive subsidies given for several schemes of the banking sector to meet defense needs.
The partners of the coalition were fighting for a greater development budget while describing the proposed public sector development program of RS921 billion insufficient for the next fiscal year. Prime Minister Shehbaz Sharif has already constituted a committee to review the possibility of further increasing the development budget.
The Government contemplated the development budget to more than RS1 Billones, but the Ministry of Finance wanted to restrict it and, instead, put money for defense purposes.
The FBR remains the weakest link and a reason for the lowest assignments of those required for defense and development. The FBR has lost its fiscal objectives by broad margins and almost all initiatives have been failed. Some of the FMF-FBR meetings this week were not good due to the inability of the FBR to fulfill its commitments.
Prime Minister Shehbaz Sharif on Wednesday was a committee to address the issue of reimbursements of refineries due to bad tax policies and to inflate the collection. It was decided that the oil division will consult with the Finance Division and the Income Division to finish the proposal regarding the mechanism for adjusting sales tax on refinery products, according to the decision.
It is also necessary that the unjustified tax of 1% on income on exports in the budget ends after the normal tax regime has entered into force of this fiscal year.
Pakistan blamed India on Wednesday for a deadly attack on a school bus.
The prime minister’s office declared on Wednesday that in an act of rebuking and cowardly terrorism, a school bus that transported innocent children was attacked today in Khuzdar, Baluchistan by representatives sponsored by the State (Fitna al Hindustan) of India that the world has greatly known as an epic of instability in the region.
Sequel to serious failure to intimidate Pakistan through open military media, ascending terrorist incidents are being orchestrated through their representatives at a scale intensified in Baluchistan and Khyber Pakhtunkhwwa, deliberately pointing to civilians in a useless attempt to destabilize the Pakistan, according to the office of the prime minister.
The disgusting incident led to the martyrdom of three innocent children and two soldiers along with 53 injured, including 39 innocent children of which 8 are critical, according to the government.
Given the high tensions, the authorities said that next year’s defense budget must increase exceptionally once to strengthen the capacities of the army, the Navy and the Air Force.
