ISLAMABAD, Feb 8: Pakistan has decided to reduce the share of defence expenditure in GDP to 3.6 per cent, thus reverting to a trend that aimed at keeping the defence budget constant in real terms over the medium term.

Informed sources told Dawn here on Saturday that Pakistan had informed the World Bank and the IMF that continued tension on the country’s eastern border was still hampering the government’s ability to create additional space for the much-needed increase in human development expenditure.

Nonetheless, both the international donors were assured that Pakistan’s defence expenditure will “remain static” despite provocations by India, which has increased its military budget manifold, particularly during the last three years.

The sources said Pakistan had been advised by both the international donors to continue discussions with them to assess the quality of current financial year’s Rs140 billion Public Sector Development Programme (PSDP) and the Interim-Poverty Reduction Strategy Paper (I-PRSP) programmes.

The donors were also informed that district governments were executing their investment budgets in line with the needs and priorities of the community they administer.

The government was expecting that the devolution of investment expenditure to the elected local administrations will increase the effectiveness of such expenditure.

The sources said the World Bank and IMF were told that various reforms in government procurement policies, the restructuring of Water and Power Development Authority and Karachi Electricity Supply Corporation, and better monitoring and greater accountability of public enterprises will achieve the programmed reduction of quasi-fiscal activities and of explicit and hidden subsidies to public enterprises. Assurances were given particularly about Wapda that it will not require any further budgetary support from the next financial year.