Expenditure cuts can meet relief cost
By Kaiser Bengali
NOVEMBER 19 will go down as an discomforting day in the country’s history. It is a day on which General Musharraf and his prime minister will ask invited delegations from over 70 countries and international organizations to fill the country’s kashkol. The general has already set the stage by complaining on international media about the fact that the victims of Hurricane Katrina have received more aid than the earthquake-affected people of Pakistan.
Receiving aid is not a right and any comparison on this score is not proper. But then, the whole exercise in garnering aid for those who have suffered is demeaning for the people and the country. After all, regional neighbours Iran, Sri Lanka and India have in recent years also suffered large-scale natural disasters, but did not wail for aid a la Pakistan. In fact, India at first responded to the tsunami disaster by announcing that it does not need foreign assistance, but relented after it was accused of displaying national pride bordering on arrogance. The Musharraf regime has taken Pakistan to the other extreme.
The general’s economic managers have repeatedly stated that the earthquake will have little or no economic or budgetary impact. Putting together whispers in the corridors of power in Islamabad, it appears that a decision has been made to refrain from politically uncomfortable readjustments in budgetary allocations and rely instead on foreign grants and loans to finance reconstruction. The excessive enthusiasm for the donor conference can be seen in this context.
The people of Pakistan, including those who have actually suffered from the devastating earthquake, are a proud lot. Given a choice, they would have gone about organizing relief and rehabilitation with greater dignity. Pakistan is not a basket case among the developing economies of the world; rather, it possesses the resources to stand on its own feet to a large extent. Admittedly, some foreign assistance, particularly in logistics and technical fields, is required. But the stage for petitioning for financial assistance has to be preceded by first reducing some of the colossal waste of public resources that governments in Pakistan have been guilty of over the past many years. It does not appear to be legitimate to ask the outside world to foot the bill for reconstruction, while continuing with wasteful expenditures at home.
An analysis of Pakistan’s federal public finances for the past five years — from 2000-01 to 2004-05 — shows that while the government collected a total of Rs. 2,368 billion in tax revenues, it spent Rs. 3,395 billion on non-development heads. This means that for every 100 rupees that the government collects in tax revenues, it spends 145 rupees on itself and not a single rupee is spent on the welfare of the people.
Over the same period, the government spent a total of Rs. 837 billion on defence and Rs. 704 billion on development. In other words, for every 100 rupees the government spends on development, it spends 119 rupees on defence. And despite strident claims regarding improved governance, expenditure on administration has over the last five years increased at an average of 10 per cent, net of inflation.
The result is growing poverty, with the percentage of people living in extreme poverty ranging from 40 to 60 per cent in large parts of the country, particularly in Balochistan and rural Sindh. The existing fiscal situation is no longer feasible nor can it be tolerated. Taxes can only be legitimately collected if the proceeds are devoted to the service of the people. Today, the people of the earthquake-affected areas urgently need assistance and the government is duty bound to come to their aid.
It has been estimated that a Rs. 500 billion five-year reconstruction and development plan for the affected region will be necessary to rehabilitate the people and the infrastructure. The continuing demands of poverty reduction across the country and the additional burden of reconstruction in earthquake affected areas calls for a substantial restructuring of national public finances. This must of course preclude any increase in indirect taxes or in deficit financing to meet fiscal exigencies or contracting additional loans in the name of reconstruction. Rather, the required amounts can be raised through a corresponding reduction in public administration and defence expenditures. Several areas of budgetary shifts can be identified
Prior to its ousting, the Nawaz Sharif government had carried out an exercise to downsize the federal government. General Musharraf too, after seizing power, declared his intention to abolish several ministries and divisions. Ironically, all movement in this respect has been in the opposite direction and Prime Minister Shaukat Aziz presides over an army of cabinet ministers that is the largest in Pakistan’s history. Clearly, civil administration expenditure emerges as the first candidate for initiating economies. It is time federal ministries, divisions, departments, corporations, and agencies falling under the purview of the Concurrent List of the Constitution are abolished and the size of the federal cabinet is limited to under 10.
There are agencies on the military front too that appear to be redundant. For example, there has existed since independence the Coast Guards to protect the maritime area of the country. Subsequently, the Maritime Security Agency was also created for essentially similar tasks. Clearly, one of the two needs to be abolished. It appears, therefore, that a downsizing exercise also needs to be carried out with respect to defence expenditure. It is now imperative that details of the composition of defence expenditure, particularly non-combat expenditure, are made public. Nevertheless, despite the absence of detailed information, some of the areas in this respect can be highlighted.
The military is currently constructing a new GHQ in Islamabad. The cost of the project has not been made public, nor has the amount been sanctioned by parliament. The rationale for shifting the GHQ from Rawalpindi to Islamabad has been made on grounds of personal security of the Army Chief of Staff, the present one also occupying the office of the president. By contrast, a hundred thousand lives are at stake in the earthquake-hit areas and the relative priority in the matter cannot be in doubt. The general’s personal security can perhaps be ensured in a low-cost manner by temporarily shifting the president’s office to Rawalpindi. In any case, the construction of the GHQ needs to be cancelled forthwith.
The military’s intelligence services have secret budgets, which are likely to be in nine digits. Intelligence operations are necessary for the country’s security. In this respect, however, the ISI appears to have been more active in domestic politics and has specialized in destabilizing representative governments and subverting the constitutional and political process. It is indeed ironic that officers who are paid out of the public exchequer have public funds at their disposal in order to undermine the public interest. It is time the ISI, or at least its political wing, is abolished.
Prior to 1971, the country’s eastern province of East Pakistan was more vulnerable militarily, given that it was surrounded almost on all sides by a hostile India. The brewing civil war and prospect of war with India justifiably led Pakistan to raise additional military during 1969-71. However, the secession of East Pakistan reduced the country’s size, and with no threat on the western borders, it was basically the eastern front where the military needed to be deployed for defence purposes.
Over 100 years ago, British colonial rulers built a string of cantonments from Delhi to Peshawar as part of their efforts to contain Russian expansion towards the Indian Ocean. Pakistan today does not face any military threat all the way from Afghanistan to Kazakhstan. Yet, these cantonments continue to exist at the average rate of one every 40 kilometres just along the National Highway from Lahore to Peshawar. Several of these need to be closed down and the land transferred to the relevant civilian authority for sale at commercial basis.
There has existed a practice of colonial standing of allotment of land to military personnel. Since the 1960s, the practice has been further strengthened with the formation of Defence Housing Authorities and similar other housing schemes on cantonment lands. Cantonment lands are presumably meant for military uses and it is a moot point whether the military is entitled to profit by transferring any part of such lands from military to non-military residential and commercial purposes.
Nearly 60 years after independence, it is time to abolish the practice of allotment of lands to military officers at subsidized rates. It is also time all cantonment lands not required for military purposes be reverted to the relevant civilian authority for sale at commercial basis.
Retired military officers are now routinely appointed to civil service positions. During their civil tenure, they continue to draw their military pensions as well as their salaries for the civil positions that they hold. On retirement from their civil positions, they also draw a second pension. This is an unjustified burden on the budget. Military officers posted on civilian positions need to have their military pensions and privileges suspended till the time they are drawing their ‘civilian’ salaries and doubly retired officers drawing double pensions need to be required to choose between the two pensions.
With reasonable cuts in defence and administrative expenditure, Pakistan can doubtless make enough saving in public money and can surely lower its dependence on international charity to meet the cost of relief, reconstruction and rehabilitation of the quake victims in the north.


