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In keeping with Prime Minister Imran Khan’s austerity drive, Pakistan’s defence budget this year, announced Tuesday, is exactly the same as last year – Rs 1.15 trillion or US$ 7.6 billion. But the alarming slide in the rupee to dollar rate and the current inflation rate of 9.41 per cent mean there will be less foreign exchange for imported equipment and less money for domestic expenditure. Will this net decrease impact the defence preparedness of Pakistan? Will the ongoing economic crisis push Pakistan to review its aggressive national security strategy?

In my view, the larger financial problems will finally force Pakistan to seek accommodation with India.


Also read: Pakistan’s economy is in for a lot of pain


Financial catastrophe

For a decade now, Pakistan has been facing economic crisis. According to Prime Minister Imran Khan, the national debt is now at $205 billion. Its foreign exchange reserves are at a record low. Its tax revenue is only $22.7 billion, half of which is used for debt servicing.

The suspension of American aid of $1.3 billion has further aggravated the problem. The $62 billion China-Pakistan Economic Corridor (CPEC) project is the biggest hope for Pakistan, but also its biggest problem as it rapidly adds to the external debt. Being a national security state beholden to its military, Pakistan’s defence budget hovered at about 3 per cent of its GDP and accounted for 21 per cent of annual government expenditure last year.

A façade?

In the midst of this economic crisis and a week before the 2019-20 budget, there was a surprise development when the Pakistan Army committed itself to a voluntary defence budget cut. Last year, the defence budget had been increased by 20 per cent.

There was extensive coverage of the proposed defence budget cut/freeze in the Indian media. Analysts were unanimous in their views that the Pakistan military is merely putting up a façade to meet the stringent conditions laid down by the World Bank and other donors. And that it will continue to meet its security needs by hiding the real defence expenditure and putting it under other categories.


Also read: Pakistan’s defence budget unchanged due to Imran govt’s austerity drive


A national security state

Assuming that 20-25 per cent of Pakistan’s budget is for imports and 75-80 per cent for domestic expense, the net decrease in the defence budget is approximately 11.5-13.25 per cent.

A decrease of 10-15 per cent can be covered by clandestinely making up the deficit by diverting from other categories. But given the state of Pakistan’s economy, it is unlikely. In the short term, the military will tide over the problem by tightening the belt and deferring the payments of imported equipment, which is mostly from China. However, if economic problems persist, in the long run, the defence preparedness to pursue current security aims will be affected.

Pakistan needs to maintain the current levels of defence spending because of its aggressive national security strategy. Else, it can take care of its fundamental security needs with half the current budget. Its nuclear weapons ensure that there can be no existential threat to Pakistan from India.

Problem child in South Asia

India is a status quo power that has militarily refrained from any action to recover its territories occupied by China and Pakistan. It seems it is even willing to settle for the Line of Control and Line of Actual Control as International Boundary in return for lasting peace and economic development.

Afghanistan and Iran are too weak to pose any threat to Pakistan. Pakistan’s security problems are self-created. It seeks the role of a major power in the region and leadership of the Islamic Umma.

Pakistan seeks parity with India and actively confronts it by waging a proxy war in Jammu and Kashmir. The war in Afghanistan is driven by Pakistan’s regional ambition to have a government of choice in Kabul. A politicised military is the driver of Pakistan’s national security strategy.


Also read: Modi is not wrong in thinking Pakistan wants talks with India to earn global brownie points


India’s choice now

The future of Pakistan’s economy hinges on the success of the CPEC. A lot is at stake for China too, both financially and prestige-wise. The CPEC cannot succeed with conflict raging north and south of it.

There are no black and white solutions for disputes between sovereign states. To begin, we can diplomatically pursue the India-China bilateral model and replicate it with Pakistan. India should also reconsider its stand on China’s Belt and Road Initiative. Regional economic cooperation between India, China, Pakistan and Afghanistan can go a long way in promoting peace in the region. Of course, all these hinge on Pakistan reviewing its aggressive strategy in Jammu and Kashmir and Afghanistan.

Let me end with a cautionary note. With reforms and modernisation of our own armed forces at a standstill for the last 20 years due to inadequate defence budget, Pakistan, despite the economic crisis, has adequate military capacity to stalemate us. As a much bigger economy, with a defence budget five times that of Pakistan, we must create an overwhelming edge in key military technologies, which are beyond Pakistan’s economic reach.

Lt Gen H S Panag PVSM, AVSM (R) served in the Indian Army for 40 years. He was GOC in C Northern Command and Central Command. Post retirement, he was Member of Armed Forces Tribunal. Views are personal.

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9 Comments Share Your Views

9 COMMENTS

  1. If there was a war with. Pakistan the state of the Indian Army is such that we may be defeated in the short run. Ammunition defective, our Armour and other equipment prone to mechanical failure and there is no jointness with the IAF. One consolation is both countries possess a WW2 Army but the Pakistani soldier is more battled hardened. The years of army deployment against insurgency has taken its toll on the Indian Army and the Calibre of the senior leadership is sub par.
    The Indian Navy is no better, the first thing one notices on boarding a Indian naval ship is how filthy it is,
    badly maintained the equipment, the crew badly trained with the exception of a select group the rest have poor seamanship and navigation skills. The guns and other equipment are antiquated and gunnery skills abysmal.
    The IAF has badly maintained Aircraft while the pilots are motivated and well trained the IAF has a poor accident record, in the event of war expect a crucial number of aircraft to be out of service. This along with lack of coordination with our strike formations will prove to be critical in the event of war with Pakistan.
    Expect Pakistan to be rapidly reinforced by China in terms of lost aircraft and armour if there is a prolonged war, expect India to runout of ammunition sooner than we expect due to defects caused by manufacture and storage. Expect some bold tactical moves from the Pakistani commanders. The Pakistani punjabi soldier when fighting to defend the Punjab cannot be beaten for motivation they are equal to the Sikh soldier from our side of the Punjab. In effect the Indian forces will fight a Punjabi army from the Pakistan side of the Punjab.
    It is best we make peace with Pakistan as Punjabi’s are a homogeneous lot and culturally close to one another, why shed blood over our glorious and eternal land, once the domain ruled by Ranjit Singh and the proud Khalsa which was once shared as equal with the Punjabi mussulman, both with an identical culture, speaking a common language with a common script.

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  2. well even if Pakistan can stalemate us,it will be a huge burden on Pakistan to fight such a stalemating war.While we are in a position to sustain this cost.Not saying that we should go to war with Pakistan(that should be the very last option) but our planners need to keep this as an option.
    Pakistan remains in the grip of its Army,more so with current puppet PM selected by it,so we need to be on guard and keep all options open to inflict heavy pain on Pakistan when need arises.

  3. Another insightful article by Gen. Panag. The deep state within Pakistan probably extends the olive branch to India hoping to buy time to recover its financial health, thereafter to return to business as usual i.e. proxy war etc. Can’t take peace overtures from Pak at face value unless we can lock in tangible, irreversible gains. The question is how do we play this, what goal to aim for and are we ready for the opportunities this offers. The options would seem to be various:

    (A) Reach a negotiated settlement to formalize the LOC as the international border
    (B) Agree to jointly administer J&K (as Musharraf and Manmohan apparently almost agreed)
    (C) Push Pakistan over the brink by pursuing an arms race or even precipitating a war
    (D) Do nothing; let the Chinese bail out Pakistan, consolidating their grip over PoK and Pakistan

    Difficult to believe that we have the stomach for (C) or are prepared for it in any case, as usual. (B) would be preferable – especially as we could then exercise joint sovereignty over the CPEC corridor among other things – but then it was on the table when Musharraf was around in any case and we could not make it happen; so what do we gain additionally from the current weakness of Pakistan? (A) – and even worse (D) – leave China free to increase its sway over PoK and Pakistan.

    The bottomline is that Pakistan may yet fulfill its destiny and fail … the question is whether we push things toward federation / reunification …. or lose the plot.

  4. Why not make a success of both SAARC and BRI / CPEC ? One would not call four trillion / $ 60 billion as an “ inadequate defence budget “. One always gets confused whether this figure includes or excludes the humongous figure for pensions. Unclear why reforms and modernisation of the armed forces is “ at a standstill for the last twenty years “. Surely there is more to helming MoD than a photo op sortie in a Sukhoi M 30 and visiting the troops at Siachen.

  5. Populations in India and Pakistan are now too large to be supported.
    Assume you can buy land and build a house for $30,000 , then a million homes for the population growth in Pakistan of 4m a year will cost $30b !! About rhree times the defence budget! No wonder living standards are collapsing. In India you need $100b

    • A larger population also means more working people, thus higher economic activity.
      And if population is the problem, what is the solution according to you then?

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