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Given Pakistan's high levels of defence spending the government's announcement of a freeze on the defence budget for the current year has attracted a great deal of attention. Some people have tried to interpret this in relation to the forthcoming summit at Agra next month. The reality is that Pakistan's annual budget is announced every year in mid-June; hence, there's no special significance in the timing.
This freeze does not come as a surprise to anyone looking closely at Pakistan's economic and defence policies. In the short and medium term it will not affect Pakistan's defence capability. Therefore it would be incorrect to look at this freeze as a signal before the summit, and it would be premature to see this as the marker for a more fundamental change in security policy.
The truth is that Pakistan's economy has been on external life support for many years now. The IMF reportedly had even accused it of fudging budget figures. Its foreign debt alone stands at over $38 billion and consumes nearly 50 per cent of the income. Debt servicing and defence spending will consume Rs 469 billion during the year 2001-02. Net revenue receipts would generate Rs 453 billion while the rest of the government will run on further borrowings!
The economic situation has been deteriorating during the 1990s. Poverty has increased from 17 million people below the poverty line in 1987 to 44 million in 1998. Lending institutions have been pressing hard for major reforms, of which cutting back high defence spending is one element.
The problem for analysis is the lack of transparency in Pakistan where only the overall figure of defence expenditure is provided. Average investment in defence comes to 6.45 per cent of GDP over the past 20 years. By any standards, this is a very heavy burden on society. Many studies across the world in the 1980s examining defence spending especially in developing countries have been pointing out that such high levels would have a deleterious effect on economic growth. And Pakistan has only proved the accuracy of these conclusions, though the reasons for its economic chaos are diverse.
The defence spending was also accompanied by military aid by the United States and financial assistance by Muslim states to procure weapons and equipment. Progressively, Pakistan started to rely on Chinese weapons which are priced at much lower levels than Western ones. For example, Pakistan now has just about 15 per cent of its major weapon system of US origin and around 20 per cent are acquired from Europe and the balance have come from China. China's military modernisation and supply of comparatively low cost but highly efficient weapon systems would also provide a beneficial spin-off to Pakistan.
At the same time, there have been credible reports by senior Pakistani military officers that cost the of major weapon systems and other expenses is not included in the official budget figures. Last year, the government removed military pensions (amounting to 20 per cent) from the defence budget. These are not included this year. There are also a number of large corporate organisations like the Fauji Foundation and Army Welfare Trust which run large commercial enterprises including sugar mills, fertiliser and cement factories and banks. The Army Welfare Trust is the largest commercial concern in Pakistan. The financial relationship between these enterprises and defence establishment has never been quite clear. But there are indications that profits from these enterprises are used to defray a great deal of personnel costs of the military.
What conclusions should we draw from this year's budget? It was generally believed that Pakistan would not reduce its defence spending because of objections from the Army. It is also believed that the leadership cannot take hard decisions because of opposition from hardliners wherever they may be. But the present trend has shown, especially where decisions have been taken by the Corps Commanders as a corporate body, even apparently difficult and hard decisions contrary to deeply held beliefs get taken fairly smoothly.
Second, there will be little or no negative impact on Pakistan's military capability if the freeze or even reduction remains a short-term step. In fact, it can be argued that the control and possible reduction in defence budget was becoming inevitable with the decline of the economy during the 1990s. Defence spending as a proportion of the GDP started to decline even if slowly after 1993 when the nuclear arsenal had been available for some time. Pakistan has also acquired a number of major weapon systems (like French submarines, Ukrainian main battle tanks, Chinese F-7 fighters, frigates, ballistic missiles and so on) during recent years and these would be in service for the coming decades. It continues to hold huge stocks of weapons and ammunition from the days of the Afghan-Soviet war. Only if the resource crunch leading to roll-back of defence spending continues for, say, five years or more would that erosion of military capability take effect. Pakistan is then likely to rely more on its nuclear capabilities.
Third, the reduction does not necessarily mean greater chances of peace. Pakistan has pursued, what its army chief Aslam Beg in 1989 called, a strategy of ''offensive-defence'' after it acquired nuclear weapons. Use of terror as an instrument to pursue political-ideological goals is central to the offensive component while nuclear weapons constitute the defensive dimension strategically. It is therefore interesting that at about the time of the announcement of the budget freeze, Foreign Minister Abdul Sattar was telling his US audience that Pakistan will rely more on nuclear weapons for its security and jehadi groups would increase their influence if its economy continues to be affected by sanctions.
Fourth, Pakistan's economic decline and domestic instability offers both a challenge as well as new opportunities. It would be in India's interest to see a stable and prosperous Pakistan and this will require it to spend less on defence. This requires an appropriate security paradigm. Pakistan stands isolated as never before. It is under severe international pressure to pull back from terrorism, get its economy in shape and this also requires cutting defence spending to much lower levels. We have gone on a diplomatic offensive while stepping out in counter-terrorism on the ground. The invitation to Musharraf must be seen in this light. The time is also ripe to offer arms reduction proposal to Pakistan with the promise of greater security for both at lower costs. An essential ingredient would be to seek bilateral agreements to reduce Pakistan's offensive capabilities even if it means reducing our own to maintain the existing or agreed ratios. This cannot happen at the forthcoming summit. But we need to think beyond the summit to retain diplomatic initiative in our hands to nudge Pakistan toward becoming a more co-operative neighbour.
(Air Commodore Jasjit Singh is Director
of the Institute for Defence Studies and Analyses)
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