December 25, 2006	Monday	Zilhaj 03, 1427

THE concept of relying on economic development for credible national security is relatively recent one. As experience has shown, a high defence spending often tends to retard socio-economic development and undermines national integration.

The potential negative effects of the “ security first” approach on economic growth can be assessed in terms of insufficient expenditure on the social sector (education and health), curtailment of public investments, development of trade imbalances, increased indebtedness, worsening trade imbalances and aggravation of inflationary tendencies.

While Pakistan's fragile economy lacks the capacity to support a huge outlay of defence expenditures,, the military spending has continued to be at the cost of development expenditure. Increasing non-development budget has also resulted in huge cuts in the development budget and, thus, the economic potentials have not been fully realised.

Some authors like, Brzoska (1983), have pointed to military expenditure as being an important variable in explaining the rise of foreign debt in a number of developing countries.” In Pakistan debt repayment and debt servicing has increased the non-development spending.

According to one study, "Defence expenditure in Pakistan has a negative impact on GDP growth when it increases to over 6.5 per cent of the GDP for a decade and/or more. During the 1978-88 decade, this threshold had been crossed with defence expenditures averaging 6.8 per cent." The study, which covered a period of over a quarter century since 1960, concluded, "An examination of a budgetary trade-off found that economic services as a whole were adversely affected by military expenditures."

Pakistan's focus on defence has been disproportionately much more than the other two important social sector variables, health and education. The combined expenditure on these two is much less than the military spending in any of the given years in 1990s (see table 1).

Pakistan and India have continued to prioritise defence budget over productive and social sectors. During fiscal year 2000-01, India had allocated over Rs500 billion for defence budget, the largest share in the entire budget after debt repayment; it exceeded three per cent of its GDP while Pakistan spent almost 3.45 per cent. By contrast, Pakistan allocated Rs50 billion or 1.6 per cent of its GDP to education-less than half the expenditure on defence.

India is a home to 400 million people who live below the poverty line, where as more than 50 million child labourers toil from dawn to dusk instead of attending schools. Every fourth Pakistani (as almost 25 per cent of the population is poor according to new official estimates) suffers from poverty.

Pakistan ranks 9th among 117 market economies in terms of government’s expenditure on defence as percentage of total expenditure. Pakistan ranks 17th in education and 34th in health per capita expenditure in the 34 poorest economies. The negative effect of defence spending is an under-developed social sector.

Pakistan’s defence spending has remained one of the largest components of total government expenditures since independence. While a sizeable variation in defence expenditure to GDP ratio has been witnessed over the past five decades and the ratio declined significantly toward the end of the last decade, the absolute size of defence expenditure is still considered very high.

The historical trends of defence expenditures showed that during early years of independence, the shares of defence and development expenditures in overall budgetary outlay were 17.7 per cent and 3.5 per cent respectively. This exceptionally high share of defence expenditures in early years of independence may largely be attributable to the government efforts to achieve a minimum level of deterrence for security. After that, the share of military spending in total expenditure saw a considerable decline with some fluctuations before spiking up again in 1966 on account of 1965 war with neighbouring India. However, this decline proved short lived, as the ratio surged again in 1972 due to 1971 war before dipping down to pre-1965 war trend. After 1972, the ratio gradually goes down to 23.2 per cent by 1980.The declining trend reversed again in 1981 following the high tension in bordering Afghanistan.

The decade of 1990s recorded considerable decline in the share of defence expenditure. The drop in second half of 1990s was more pronounced when compared to the first half. This trend amidst a few episodes of tension is largely under pinned by the nuclear capabilities of Pakistan and neighboring India.

To sum up, the changes in defence expenditure remained war driven. It lends more credence to the view that the defence expenditure is used mainly for securing external defence and as such may not necessarily be used to counter downturn cyclical movements in the economy, as maintained by some scholars. If not managed properly in the coming years, military spending will definitely be at the cost of illiteracy, poverty and under-development. This will ultimately harm national integration.