KARACHI, March 30: Increasing military activities on Pakistan-Afghanistan borders to combat terrorism has led to almost 14 per cent increase in defence spending in the first half of the current fiscal year , the State Bank of Pakistan's second quarterly report reveals.

The SBP report released on Tuesday informs that "these unusual operations are partially financed through receipts from US, which show up in higher defence receipts".

The data shows that Pakistan's defence spending shot up to Rs87.3 billion in the first half of the current fiscal year as against Rs76.7bn in the same period in 2002-03.

It shows an increase of Rs10.7bn which is 13.9 per cent. Defence spending is the second largest expenditure in the current expenditure budget of the government.

Overall, the strict control over government expenditure during the second half of 03-04 is visible and consolidated growth during July-December 2003 has been noted at 3.6 per cent. This growth, the SBP report says, is well within the average 4 per cent growth budgeted in the 03-04.

The report also observes a significant rise of about 23 per cent on interest payment on foreign debts during first half of the current fiscal year. In actual terms the interest payment on foreign loans increased to Rs22.5bn in the first half of this fiscal from Rs18.3bn in corresponding period last fiscal year.

There has been a decline in interest payment on domestic debts to Rs76.3bn in the current fiscal from Rs79.8bn last fiscal year because of the obvious reasons.

Consolidated expenditure during July to Dec 3 amounts to Rs412.8bn which is Rs14.2bn or 3.6 per cent higher than Rs398.6bn in same period last year. A robust increase of 13.9 per cent in the revenue amounting to Rs379.1bn in the first half of this fiscal year as against Rs332,9bn in the same period last fiscal was found to contain fiscal deficit to a mere 0.8 per cent.