Economics Assignment

Topic:Defence Budget
Class: B.com (hons) Section: Session: Submitted By: "unaid #li $2% &uhammad Sa'id $2( #)dul *asee) $20 * &uhammad +sman $0, *am-a #li $01 Submitted to: ./of. S0ed Salman 1i-a2i C 2010 1!

*#3456 C744585 79 C7&&51C5

OUTLINE

.u/pose of this )udget 1elation )et:een the )udget and econom0 Defence )udget 2011 12 Causes of inc/ement in it ./e2ious )udget C/iticism on /ecentl0 p/esented defence )udget Conclusion

Paks Total Military Outlay Over Rs 718 Bn for 2011-12

Pakistan governments total outlay for the military for fiscal 2011-12 is over Rs 718 billion, considerably higher than the defence budget of Rs !" billion sho#n in budget documents$%n addition to the defence budget, the &inance 'inistry has allocated Rs 80 billion under the (rmed &orces )evelo*ment Programme, Rs "0 billion under reimbursements from the +, -oalition ,u**ort &und for e.*enses on the #ar on terror and Rs 20 billion received for *artici*ation of the armed forces in +/ *eacekee*ing missions$0ver and above these allocations, another Rs 71$2 billion #ill be *aid as military *ensions from civilian accounts, a *ractice started in 2000 by e.military ruler Perve2 'usharraf to give the im*ression that Pakistan had slashed its defence s*ending$( senior official of the &inance 'inistry outlined the actual outlay for the military #hile interacting #ith a grou* of 3ournalists yesterday, media re*orts said today$4he stated budget, additional allocations and military *ensions amount to almost 25 *er cent of the total budget$4he additional allocations are reflected in budget documents as 6grants7 under the heading of 6contingent liabilities$7 4he additional allocation of Rs 1"0 billion for 2011-12 is Rs 8$ billion or almost si. *er cent more than the similar outlay for the outgoing fiscal$ %n the outgoing fiscal, the government allocated Rs 110 billion for contingent liabilities but actually s*ent Rs 1 1$7 billion, according to budget documents$ 4he stated defence budget for the outgoing fiscal #as Rs 2 billion$

4he (rmed &orces )evelo*ment Programme too #as conceived by 'usharrafs regime to e8ui* the military #ith the latest combat aircraft, surveillance *lanes and systems, submarines and other so*histicated #ea*ons$ 4his *rogramme #ill continue till 202"$ 9o#ever, the &inance 'inistry official told the 3ournalists that the government has decided to reduce the amount it e.*ects to receive from the +, -oalition ,u**ort &und in a substantial manner$ %n the outgoing fiscal, the government had estimated that the +, #ould reimburse around +,) 1$1 billion but the actual reimbursements had amounted to +,) 7 " million so far$ 4he +, is 6using dilly-dallying tactics7 #hile making reimbursements and uses the funds as 6leverage to achieve its strategic goals,7 4he /e#s daily 8uoted its sources as saying$ 4he +, no# #ants to Pakistan to launch a fresh anti-militancy offensive in the #eeks ahead after #hich the funds might be reimbursed, the sources said$

%n the #ake of Pakistani militarys failure to detect 0sama bin :adens *resence in the garrison city of (bbottabad and the daring terrorist raid on a naval airbase in ;arachi that killed 10 security *ersonnel and destroyed t#o surveillance aircraft, o**osition *arties like the P':-/ have called for a debate on defence s*ending in Parliament$ ,ome defence analysts have demanded that defence allocations should be linked to *erformance$ 4he o**osition *arties have also demanded that full details of the defence budget should be *laced in Parliament but the government stuck to the *revalent *ractice of tabling the outlay in the form of a brief statement$ 0f the stated defence budget of Rs !" billion, Rs 205$" billion #ere allocated for em*loyeesrelated e.*enses, Rs 128$1 billion as o*erating e.*enses of the armed forces, Rs 117$5 billion for creating *hysical assets and Rs 2$7 billion for civil #orks

Cost of War on Terror for Pakistan E ono!y" Pakistans economy is under *ressure of the <ar on 4error intensifying for last four years in (fghanistan$ ,ince 2005, the <ar has s*read like a contagion into settled areas of Pakistan that has so far, cost the country more than 1",000 citi2ens, 1"00 security *ersonnel, destruction of infrastructure, internal migration of millions of *eo*le from *arts of north#estern Pakistan, erosions of investment climate, nose diving of *roduction and gro#ing unem*loyment and above all brought economic activity to a virtual standstill in many *art of the country$ Pakistan had never #itnessed such devastating social and economic u*heaval in its industry, even after dismemberment of the country by direct #ar$ (fter !=11 Pakistan had to assume the role of a frontline state in the <ar against 4error$ 4he onset of the <ar disru*ted Pakistans normal trading activities, as the cost of trading increased substantially because of higher insurance cover$ -onse8uently, economic gro#th slo#ed demands for im*orts reduced #ith conse8uential decline in ta. collection and inflo#s of foreign investment #ere naturally adversely affected, accentuated by the travel bans issued by #estern governments to its entre*reneurs$ <hile the economic situation #as #orsening, a ne# elected government took *o#er in 2008 and the 'inistry of &oreign (ffairs constituted an inter-ministerial committee to assess the direct and indirect cost of the <ar on 4error on Pakistan$ 4he 'inistries of &inance, %nterior, -ommerce and some other relevant government de*artments *lus the re*resentatives of t#o *rovinces bordering turbulent (fghanistan *artici*ated in these deliberations$ (fter fe# sessions and valuable in*uts from all sides, the committee estimated the cost of <ar on 4error and its im*act on Pakistans economy and society$ 4he conclusion #as that the <ar not only caused serious damage to the economy, but also to the social fabrics of Pakistan$ 0bviously, continuity of <ar #ill continue to bleed the economy and society of Pakistan$ (t the start of the <ar, the cost of it to Pakistan #as estimated at > 2$55! billion in fiscal year 2001-02$ 4his calculation #as based on the assum*tions that? @iA 4he <ar in (fghanistan that begun on 0ctober 7, 2001 #ill end s#iftly by )ecember 2001? @iiA normalcy #ill resume from Banuary 2002C @iiiA the 4aliban government #ill be ousted and some lo# intensity fight #ill continue but life in Pakistan #ill remain normalC and @ivA the additional increase in freight cargo

and #ar risk *remium #ill be removed$ 4he abovementioned assum*tions #ere not materiali2ed and instead the #ar on terror continued to gain momentum and became more *recarious for the entire region in general and Pakistan in *articular as it shifted to its settled areas to disru*t all kind of investment and economic activity$ Pakistan became more insecure in its efforts to make the #orld a safer *lace to live$ Pakistan continued to *ay a heavy *rice in terms of both the economic and security terms$ ( large *ortion of its resources, both men and material are being consumed by this #ar for the last several years$ 4he economy #as sub3ected to enormous #ire t an# in#ire t osts #hich continued to rise from > 2$55! billion in 2001-02 to > 11$5 billion by 200!-10, *ro3ected to rise to > 17$8 billion in the current financial year @2010-11A and moving for#ard, the direct and indirect costs to the economy is most likely to rise further$ 4he com*arison of cost for 2001-02 and 2010-11 is given in 4able-1 and the year-#ise cost of #ar on terror is documented in 4able-2? Dconomic ,urvey 2010-11 220 Ta$le 1" Cost of War Esti!ate in 2001-02 an# 201011%& Billion' 2001-02 2010-11 %Est(' D.*orts 1$ 0 2$!0 -om*ensation to (ffectees 0$00 0$80 Physical infrastructure 0$00 1$72 &oreign %nvestment 0$1" 2$10 Privati2ation 0$"0 1$10 %ndustrial out*ut 0$11 1$70 4a. -ollection 0$2" 2$10 -ost of +ncertainty 0$10 2$!0 D.*enditure 0ver run 0$11 1$50 0thers 0$10 0$!0 Total" 2(72 17(82 Source: Ministry of Finance Ta$le-2" Cost of War %2001-2011' )ears Billion & Billion Rs( * C+an,e 2001-02 2$55! 151$! 2002-0- 2$7 ! 150$8 1$0 200--0. 2$!12 158$8 5$7 200.-0/ 1$ 10 202$ 15$1 200/-00 1$!85 218$5 15$! 2000-07 $570 281$2 17$2 2007-08 5$! 0 1 $1 8$5 2008-01 !$180 720$5 12$1

2001-10 11$"50 1115$ 7$7 2010-112 17$810 1"28$0 11$" Total" 07(120 /0-0(8 * Estimated on the basis of 8 months actual data Source: MoF, M/o Foreign Affairs Joint Ministerial Grou )uring the last 10 years the #ire t an# in#ire t ost of #ar on terror incurred by Pakistan amounted to & 07(1- $illion or Rs(/0-7 $illion$ 4he events that trans*ired after !=11 in (fghanistan #orsened the security environment in the country$ (s a result, the #estern countries including the +nited ,tates continued to im*ose travel ban for their citi2en !in"estor, im orters etc#$ to visit Pakistan$ 4his has affected Pakistans e.*orts, *revented the inflo#s of foreign investment, affected the *ace of *rivati2ation *rogram, slo#ed the overall economic activity, reduced im*ort demand, reduced ta. collection, e.*enditure over-run on additional security s*ending, domestic tourism industry suffered badly, hundredsC and thousands of 3obs could have been created had economic activity not slo#ed as #ell as thousands of 3obs #ere lost because of the destruction of domestic=foreign tourism industryC destruction of *hysical infrastructure @military and civilA massive surge in security related s*endingC migration of thousands of *eo*le from #ar affected areas and the associated rise in e.*enditure to su**ort internally dis*laced *ersons$ Pakistans investment-to-E)P ratio has nosedived from 22$" *ercent in 2005-07 to 11$ *ercent in 2010-11 #ith serious conse8uences for 3ob creating ability of the economy$ Eoing for#ard, Pakistan needs enormous resources to enhance *roductive ca*acity of the economy$ 4he security situation #ill be the key determinant of the future flo# of the investment$ Pakistan economy needs an early end to this #ar$ 1efe/ence: http:;;:::.finance.go2.p<;su/2e0;chapte/=11;Special>20Section=1.pdf

Bu#,et 2011-2012" 3efen e s4en#in, u4 $y 12*

%,:('(F()? Pakistan has matched %ndias increase in defence s*ending, 3acking u* its defence budget by nearly 12 *er cent for the ne.t fiscal year amid rene#ed +, *ressure for a full-scale military o*eration in the /orth <a2iristan tribal agency$ )efence allocation has been increased to Rs !"$2 billion for 2011-12, com*ared to last years Rs $2 billion$ %nterestingly, %ndia had also raised its defence e.*enditure by 12 *er cent in &ebruary this year, though the si2e of their budget is much bigger than Pakistans$ -iting resource constraints, the government, ho#ever, refused to acce*t the original re8uest by the military establishment #hich had sought an 18 *er cent increase, or Rs"2 billion, for defence e.*enditure$ (ccording to the budget document, of the total Rs !"$2 billion, Rs205$ billion has been allocated for em*loyee-related e.*enses, Rs128$2 billion for o*erating e.*enses and Rs117$" billion has been set aside for *hysical assets$

4he figures, ho#ever, do not include over Rs71 billion allocated for *ensions of military *ersonnel that #ould be *aid from the civilian budget and a se*arate allocation for securityrelated e.*enses in a move, #hich critics say, seeks to conceal the actual defence budget$ -alls have been made for greater scrutiny of the defence s*ending since the 'ay 2 (bbottabad e*isode that embarrassed the military establishment over their ignorance of 0sama bin :adens *resence in Pakistan and the +, o*eration$ 4he defence budget has never been debated in detail in *arliament$ 6Parliament should critically revie# defence allocation in the budget,7 said Fushra Eohar, la#maker from the (#ami /ation Party, a coalition *artner in the government$ 4he main o**osition *arty, the Pakistan 'uslim :eague-/a#a2 @P':-/A, has also 8uestioned the increase in defence s*ending$ 6%n the long run, its a reci*e for disaster,7 said P':-/s %nformation ,ecretary (hsan %8bal$ 6%nvesting in education is the only #ay to ensure security,7 he added$ 9o#ever, military officials tried to *lay do#n the increase in defence e.*enditure, arguing that additional funds have been sought to meet e.*enses of troo*s de*loyments in restive areas, ration e.*enses and to offset the im*act of the de*reciation of ru*ee against dollar and doubledigit inflation$ %n his budget s*eech, &inance 'inister (bdul 9afee2 ,haikh briefly commented on the increase in defence s*ending, saying that the current security situation #arranted the hike$ (nd it is not 3ust the human cost$ 4he battle against militancy has cost Pakistan >58 billion in the same *eriod$ %nterestingly, #hile the +, has 3ust *rovided over >11 billion to Pakistan over the last 10 years, the losses in 2010-11 alone #ere recorded to be >17$! billion$ %ublished in &he E' ress &ribune, June (th, )*++

Rs/0$n to $e s4ent on internal se urity %,:('(F()? 4he government #ill s*end Rs"5 billion on internal security of the country during 2011-12 as the intensity of terrorist attacks, es*ecially after the killing of (l Gaeda chief 0sama bin :aden in (bbottabad, has made the 3ob of the de*artments concerned more challenging$ 4he *ro3ected allocation includes Rs"$8 billion for various *ro3ects under the Public ,ector )evelo*ment Programme @P,)PA$

%t is not kno#n ho# much money #ill be s*ent on training *olice and civil armed forces *ersonnel and #hat ste*s are being taken to e8ui* them #ith latest #ea*ons and other a**aratus$ 'ost of the money allocated for security de*artments #ill be s*ent on *ay and allo#ances, accommodation and construction of buildings$ 4he allocation is Rs1$" billion more than the Rs" $"8 billion s*ent this year$ 4he break-u* of the allocation sho#s that Rs "7$11 million has been earmarked for the interior division, Rs $77 billion for %slamabad *olice and local administration, Rs8"5$"7 million for *ass*ort outfit and Rs2 $08 billion for civil armed forces$ 4he &rontier -onstabulary #ill get Rs"$51 billion, -oast Euards Rs1$71 billion and Rangers Rs11$ " billion, #hile Rs1$!5 billion has been set aside for Hother e.*enditures$ ( sum of Rs7"" million has been allocated for the administration of *ublic order, Rs1 million for *rison administration, Rs8" million fire *rotection and o*eration and Rs1$0" billion for *olice$ ,ignificant *ro3ects to be financed under the P,)P include the %ntegrated Forder 'anagement ,ystem @%F',A for #hich Rs220$"8 million has been allocated$ )uring the year, Rs102 million #ill be s*ent on raising the Falochistan -onstabulary, Rs2" million on conversion of F- into (- areas in Falochistan and Rs100 million on setting u* the /ational &orensic ,cience (gency head8uarters and the %slamabad laboratory$ 4he Pakistan (utomated &inger*rint %dentification ,ystem @P(&%,A Phase-%% has been allocated Rs100 million, *rocurement and installation of a /on-%ntrusive Iehicle J-Ray ,ystem @/I%,A Rs1"0 million, 'achine-Readable Pass*ort and Iisa Pro3ects *hase-% Rs50 million and Phase-%% Rs!00 million, construction of accommodation for Fhitai Rangers in ;arachi Rs200 million and for (bdullah ,hah Eha2i Rangers Rs200 million$ ( sum of Rs81$17 million has been allocated for hard#are and soft#are u*grading of the /ational )ata <arehouse at /adra head8uarters, Rs !7 million for the %slamabad develo*ment *ackage, Rs10 million for the construction of a Budicial and (dministration -om*le. in %slamabad, Rs1 7 million for the Po*ulation <elfare Programme and services in %slamabad, Rs100 million for the /ational Res*onse -entre for -yber -rimes Phase-%%, Rs1!$!1 million for allied facilities at the /ational Public ,afety commission building$ Purchase of land and allied facilities under occu*ation Galat ,couts in Falochistan #ill cost Rs120 million and Rs185 million has been earmarked for the ,afe -ity %slamabad Pro3ect$

Causes of increment in it:

9o/ the financial 0ea/ 2011 12? the 8o2e/nment of .a<istan has inc/eased the count/0@s &ilita/0 )udget )0 12 pe/cent. This also includes the 1(> inc/ease in the sala/ies of the emplo0ees. The total amount of the )udget is 1s. !A( )illion? compa/ed to 1s !!2 )illion fo/ the 0ea/ 2010 11. 3n te/m of +SD? the total amount is a)out B (.%( )n. The 9inance &iniste/ :hile 'ustif0ing the inc/ease in the defence )udget said? Ce li2e in a difficult neigh)ou/hood. Ce a/e faced :ith th/eats to ou/ secu/it0. Ce /emain engaged in a st/uggle fo/ the safet0 of ou/ citi-ens. Ce a/e the 2ictims of :a/ on te//o/ism. This is a g/eat /ealit0? the 9inance &iniste/ has highlighted. *o:e2e/? the count/0 is conf/onted )0 enemies f/om :ithin as :ell as f/om ac/oss the geog/aphical f/ontie/s of .a<istan. Do: a da0? meeting the inte/nal challenges to the secu/it0 of .a<istan has )ecome mo/e daunting and cost effecti2e than the eEte/nal th/eats. Since the commencement of the so called glo)al :a/ on te//o/ in 2001? and com)at actions against the te//o/ists? .a<istan has )adl0 suffe/ed in te/m of its com)at manpo:e/? :eapons and eFuipments and a)o2e all attac<s on its ci2il and milita/0 installations? pu)lic places and all those ha2ing no connection :ith the :a/ on te//o/. Chile anal0sing the defence )udget? one :ould <no: that? o2e/ the last fe: 0ea/s? the/e has )een a decline in the defence )udget of .a<istan in p/actical te/ms. This is indicati2e f/om the fact that? du/ing 0ea/ 2010 11? in te/m of 8D. sha/e? the defence allocation :as 2.$ pe/cent. Che/eas? despite an inc/ease of 12 pe/cent? the 8D. sha/e of defence allocation fo/ the neEt 0ea/ (2011 12) :ould go do:n to 2.! pe/ cent? a dec/ease of .2 pe/cent. #s anal0sed )0 Da:n 8/oup of ne:s pape/? The/e has )een a stead0 decline in defence se/2ices@ slice in the 8D. ca<e o2e/ the 0ea/s.This decline can )e att/i)uted to inflation? :hich as an a2e/age :as 1!.1 pe/cent and is continuousl0 inc/easing o2e/ the 0ea/s. 72e/ the 0ea/s this p/actice is going on? cont/a/0 to an appa/ent inc/ease in the milita/0 )udget. 3nside Defence )udget? the/e a/e 2a/ious heads. 9i/st is the &inist/0 of Defence itself. 7ut of the total defence outla0 of 1s. (01.,( )illion? 1s. !A( )illion :ould go the &ilita/0 i.e. th/ee se/2ices 2i-G #/m0? Da20 and #i/ 9o/ce. The sha/e of th/ee se/2ices is /ationali-ed )ased on the st/ength of the each se/2ice and the /eFui/ement fo/ the :eapons and eFuipment fo/ a pa/ticula/ 0ea/. #s /e2ealed o2e/ (0 pe/cent of this total &ilita/0 )udget? is eEpended on the emplo0ees@ /elated eEpenditu/es. 1emaining amount is then fu/the/ di2ided into 2a/ious heads. #t the le2el of Defence &inist/0? the #i/po/t Secu/it0 9o/ce? the Su/2e0 of .a<istan? &eteo/olog0 Depa/tment? and 98 schools and colleges also consumes a )ig chun< of the defence )udget. This aspect is

<no:n to 2e/0 fe: people that these depa/tments and othe/s li<e Cont/olle/ of &ilita/0 #ccounts a/e also paid out of defence estimates. 3n the glo)al ma/<et as :ell as domesticall0? o:ing to p/ice hi<e and inflation? e2e/0 0ea/ the cost of the eFuipment; items? essentiall0 needed to )e pu/chased inc/eased /easona)l0. This in tu/n necessitates an inc/ease in the defence )udget? an una2oida)le phenomenon. 9o/ the financial 0ea/ 2011 12? the ope/ating eEpenses of the th/ee se/2ices has )een estimated as 1s. 12,.2, )illion? compa/ed to 1s. 111.2! )illion du/ing 0ea/ 2010 11? :he/eas? the emplo0ees eEpenses (including the 1(> /ise in the sala/ies) has )een estimated as 1s. 20$.( )illion. Simila/l0? the amount fo/ ci2il :o/<s has )een estimated as 1s. !2.$ )illion? :he/eas? ph0sical assets :ould /emain as 1s. 11%.$ )illion fo/ all th/ee se/2ices. Compa/ed to BH! )illion? decla/ed &ilita/0 )udget of 3ndia? passed )0 3ndian .a/liament in 9e)/ua/0 this 0ea/? .a<istani &ilita/0 )udget is 'ust (.%( )illion? :hich indeed is a 2e/0 small. #cco/ding to Stoc<holm 3nte/national .eace 1esea/ch 3nstitute (S3.13) the &ilita/0 5Ependitu/es of 3ndia a/e B!1.H )illion. 3ndia doesn@t disclose its actual defence spending. *o:e2e/? 3ndia /emain the main ad2e/sa/0 of .a<istan? as the/e ha2e )een th/ee :a/s )et:een )oth count/ies and o:ing to 3ndian designs of undoing the .a<istan? as :itnessed in 1A%1? :e cannot )ecome a status Fuo nation. 8i2en the chance? 3ndia :ould go all out to undo .a<istan? the onl0 count/0 /esisting its hegemonic designs in South #sia. Th/ough its alliances :ith the ma'o/ :o/ld po:e/s? and esta)lishing itself in #fghanistan? in the ga/) of so called /e const/uction? 3ndia is posing 2e/0 se/ious th/eats to the secu/it0 of .a<istan f/om its :este/n )o/de/s. Thus :e cannot /emain aloof of all these happenings. Beside 3ndian ill designs? .a<istan? has constantl0 )een suffe/ing )ecause of the eEisting secu/it0 situation.I #nd as pe/ D/ #)dul *afee- Shai<h? Ce stand )0 ou/ 2aliant men? :ho a/e la0ing do:n thei/ li2es to safegua/d ou/ count/0. #s pe/ Stoc<holm 3nte/national .eace 1esea/ch 3nstitute (S3.13)? the/e has )een a uni2e/sal inc/ease in the milita/0 )udget of all count/ies. +nited States has inc/eased its milita/0 spending )0 ,1 pe/ cent since 2001? and no: accounts fo/ !H pe/ cent of the glo)al total? siE times to its nea/est /i2al China. #t !., pe/ cent of 8D.? +S milita/0 spending in 2010 /ep/esents the la/gest economic )u/den outside the &iddle 5ast. #s pe/ the latest figu/es p/o2ided )0 S3.13? the top 10 milita/0 spende/s of the :o/ld till 2010 a/e: +nited States (B$A, )illion)? China (B11A )illion)? 8/eat B/itain (B(A.$ )illion)? 9/ance (B(A.H )illion)? 1ussia (B(,.% )illion)? "apan (B(!.( )illion)? Saudi #/a)ia (B!(.2 )illion)? 8e/man0 (B!(.2 )illion)? 3ndia (B!1.H )illion)? and 3tal0 (BH% )illion). 3n the Su) continent? 3ndia has )een spending a huge sum of amount on its milita/0 )udget e2e/ since. Being in the clu) of top ten milita/0 spende/s? the/e has )een a constant inc/ease in the 3ndian defence Budget since last t:o decades. 3ndian is mode/ni-ing its th/ee se/2ices on the line of the milita/ies of +nited States? +nited Jingdom? and 1ussia. Howe er! owing to its wea" economy! #a"istan cannot matc$ t$e Indian defence s%ending& Ne ert$e'ess! it s$ou'd maintain at 'east t$e minimum credib'e deterrence to ensure its safety and security in t$e wa"e of enmity a'' around( domestica''y against e)tremists and terrorists and e)terna''y! t$ose a'so %romote interna' instabi'ity too&

*eference: $tt%:++www&defence&%"+forums+genera',defence+--./01,%a"istan,inside, mi'itary,budget&$tm'

#*E2IOUS 3E4ENCE BU35ETS: %,:('(F() -- Pakistans 2010-11 budget, due to be announced Bune ", could hit the *oor hard as the Pakistan Peo*les Party @PPPA-led coalition government *ro*oses to end its subsidy regime$

4he *ro*osal also #ould increase Pakistans defense budget 17K for 2010-11 from Rs 178 billion to Rs 2 billion$ 4he government is allocating Rs 110 billion for security-related o*erations and Rs 2" billion for internally dis*laced *ersons$

Fut much focus has centred on the subsidys elimination$

6( decision has been taken to *ut an end to subsidy on the Eeneral ,ales 4a. @E,4A taking effect Buly 17, an official budget document says$ ,ubsidies on electricity have *rotected the *oor against inflation at a time of income stagnation$

(bolition of the subsidy of the E,4 on electricity #ould mean a considerable increase in *o#er costs for all Pakistani consumers from Buly 1, said )r (bid ,uleri, e.ecutive director of the ,ustainable )evelo*ment Policy %nstitute$

60ne thing that is going to make the u*coming annual budget different from the *revious ones is that the government is bound to im*lement commitments, such as abolition of the subsidy on electricity, given to the %nternational 'onetary &und @%'&A for getting a >11$1 billion loan under a standby arrangement7, he said$

4he %'& has *ressed Pakistan to reform its electricity billing system and end the subsidies$ Pakistans ailing economy cannot survive further subsidies on *o#er, gas and other utilities, the %'& and other donors argue$

(nother ma3or change in Pakistans annual budget is im*lementation of a controversial valueadded ta. @I(4A beginning Buly 1 and other ne# ta. measures to achieve the ambitious revenue target of Rs 1$7 billion$

4he I(4 is controversial in Pakistan$ 4hree *rovinces L ,indh, ;hyber Pakhtunkh#a and Pun3ab L are not ready to acce*t this ne# ta.$ 4heir chief ministers told Prime 'inister Mousuf Ra2a Eilani recently that the I(4 is not acce*table to them$ 4hey foresee it as a further burden on ta.*ayers that might trigger strong *rotest$

9o#ever, the government is de*endent on %'& loans and sees no other o*tion but to im*lement the I(4 from Buly 1, 2010$ 6(s a *olicy decision, the I(4 #ill be introduced from Buly 1 N and ne# measures #ill also be taken to achieve Rs 1,700 ta. revenue @for the &ederal Fureau of RevenueA7, the budget document said$

6% strongly recommend to the government to im*lement the I(4 from Buly 1, 2010, as it could be the best tool to check ta. evasion besides hauling in ta.es @from those #hoA have been en3oying e.em*tions in the e.isting Eeneral ,ales 4a. @E,4A regime7, )r (shfa8 9asan ;han, former advisor to the ministry of finance, observed$ 0**onents of the I(4 are those 6#ho do not *ay their due ta.es7, he said$

4he I(4 #ill hel* the government substantially increase revenue and have more resources for develo*ment, said /a2ar Eondal, federal minister for food and agriculture$

6% have no doubt that the I(4 is the only tool available to the government to bring all those #ho earn money into the ta. net7, Eondal said$

4he budget document said the economy is gro#ing at a $1K cli* in 200!-10 and estimates total revenue at Rs 2$2 billion, including Rs 1$ billion from the &FR$ 4he document said total e.*enditures for 200!-10 #ill be Rs 2,!27 billion, creating a deficit of Rs 751 billion that the government *lans to *atch through domestic and foreign borro#ing, and grants$

4he government has set *ublic sector develo*ment *rogramme @P,)PA s*ending for 2010-11 at Rs 551 billion$ 4he ma3or share of financial resources @Rs 115 billionA allocated for P,)P 201011 is allocated for infrastructure$ 4he social sector #ill get Rs 12 billion, and trans*ortation and communication #ill receive Rs 70 billion$ )r (bdul 9afee2 ,haikh, advisor on finance, said, 64he ne# strategy #ill make P,)P 2010-11 more result-oriented to ensure *eo*le-centric develo*ment7$

4he P,)P allocation also includes Rs 1"$ billion for #ater-related *ro3ects, including Rs 1" billion for land ac8uisition for the crucial )iamer-Fasha )am$

(rshad (bbasi, a scholar of #ater resources and energy-related *ro3ects, called the P,)Ps sco*e and ne# strategy meaningless #ithout *ro*er oversight$ 4he P,)P can make a difference as far as develo*ment is concerned only #hen it has a strong evaluation and monitoring system to *revent #aste of *ublic funds, he said$

6% recommend that the decision-makers bring in e.*erts and *rofessionals for making P,)P and other *olicy #ork result-oriented7, he said$

Criti is! on Re ently Presente# 3efense Bu#,et" Pakistan 'uslim league @na#a2A recently critici2ed on secret defense budget of !" billion$ %t #as said that in *arliament and in senate it should be discussed as *eo*le #ant to kno# about it that #here this budget #ould be used$ (ccording to *ml @nA it is used for lavish *ur*oses 3ust like to s*end this budget on defense housing authority and other lavish things$

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