ONE of the principal developments of this financial year is the winding down of the military operation in North Waziristan. With the successful end of the operation in the Shawal valley in mid-April, seven years of near-constant fighting between the army and the banned TTP that began in May 2009 and continued till the capture of the Shawal valley will slowly be wound down.
Last year the government was forced to seek a relaxation of 0.3pc of GDP in the budget deficit target set with the IMF, equal to Rs100 billion, to meet extraordinary, unbudgeted and “one-off” expenditures arising from operation Zarb-i-Azb, the latest operation in the seven-year-long campaign against the TTP. Next year’s budget will seek an additional Rs100bn under the same head one more time, according to a high-level source in the finance ministry, to pay for “capacity building of the armed forces” as well as IDP-related costs. The former includes the cost of creating one division for CPEC security.
The non-stop fighting between the Pakistan Army and militant groups since 2009 — from Swat, Bajaur, Khyber to S. Waziristan and N. Waziristan — has exacted a heavy toll in blood and treasure from the country. Of the 60,000 military and civilian casualties due to terrorism that the country has suffered since the war on terror began, more than 47,000 of them have been in the period when these combat operations began in Swat and the tribal agencies in 2009, according to data from the South Asia Terrorism Portal. More than two million have been displaced due to the fighting, placing Pakistan in the top 10 countries hosting the largest population of Internally Displaced Persons (IDPs) in the world. By all counts, the seven-year-long campaign against the TTP has been the longest and most ferocious fights that the Pakistan Army has ever had to undertake.
The budget has also borne a heavy burden due to this fight, although it is very difficult to get an idea of how much the fighting has cost since the figures are not reported. Even though the reported defence budget has increased by 50pc since 2009 — which coincidentally was the first year when the defence budget was presented before parliament since 1964 — as a proportion of total expenditure it has remained constant at around 12pc.
But the reported defence budget only represents the cost of salaries and benefits. Military pensions are paid from general government pensions, totaling Rs511bn from 2011 till 2015, averaging at Rs127bn per year for this period, according to figures presented in the Senate by the defence minister.
The military operations appear to have largely been paid for through grants, and in 2010 the finance ministry approved grant expenditure for the Malakand operation totaling almost Rs93bn. Cost estimates for subsequent operations have not been reported, whether officially or unofficially.
But throughout the years when the fighting raged, words uttered by successive finance ministers, and research conducted by some think tanks, reveals a constant behind-the-scenes push for additional budgetary resources coming from the military. In January of last year, for instance, Finance Minister Ishaq Dar said he needed Rs150bn additional resources to meet “extraordinary security related expenditures”. Combined with the unofficial figures reported about the Malakand operation from 2010, it is easy to see that the costs have been considerable, coming in somewhere around Rs100bn per year.
The trend of growing absorption of fiscal resources to meet military expenditures had begun by 2009. In the mid 2000s, the growth in the defence budget had petered out while development spending continued rising. The turning point came 2007, the year when the first campaigns against TTP-affiliated groups began, when there was an increase of 11pc in defence, followed by another 19pc increase the next year. By contrast, development spending increased by only 5pc in both years. As the trend continued, defence spending outstripped development spending in fiscal year ended June 2011, according to a paper by CIDOB, a Barcelona-based think tank.
Coupled with the costs of the operations, there are also costs with “capacity building of the armed forces”, and a large scale arms procurement effort under way to match India’s enhanced arms acquisition drive. The large scale costs coming from these heads are not reflected anywhere in budget documents, or the balance of payments accounts of the country.
The expenditure has brought its dividends. The TTP had marched up to Islamabad’s doorstep in 2008. Today they are scattered and their last remaining bastion in the country has been captured by the army.
The economy has noted these developments too. This year’s growth rate has returned to what it was in 2007, and a survey amongst foreign investors conducted in March and April, on the cusp of the victory in the Shawal operation, reported a spike in business confidence, which jumped by 14pc after having risen by another 22pc in the last survey held in late 2015.
“This is the highest level of business confidence ever achieved since OICCI started the survey in early 2010,” said the OICCI while releasing its results, adding that a detailed look at the survey shows that “effectively tackling law and order situation and visible improvement in energy management” are the main reasons behind the return of business confidence.
But there is a darker side to this story too. With the increased defence allocations over the years when the fighting raged, the business interests of the armed forces also increased at a record pace. Real estate schemes – fueled by a slash-and-burn land acquisition drive – grew so fast that at one point a judge of the Lahore High Court, when examining the map of Lahore showing the expansion of DHA, remarked that “it seems half of Lahore is going to be DHA”.
In the same Senate session where the figures for military pensions were presented by the defence minister, Farhatullah Babar also pointed to the huge plots of land acquired by the armed forces for defence personnel throughout the country that had been converted into residential complexes, golf courses and other recreational spots.
An even darker side of the story emerged when it was revealed that Kamran Kiyani, the brother of the army chief who had initiated these campaigns, was himself involved in the land deals of the era, and his role was going to be investigated by NAB. The fighting is going to die down, but whether or not there will be a peace dividend for the country remains an open question, notwithstanding the applause from the business community.
Published in Dawn, May 31st, 2016