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Pakistan Boosts Defense Budget

June 5, 2015 (Photo Credit: AAMIR QURESHI/AFP/Getty Images)

ISLAMABAD — Pakistan has once again increased its defense spending as revealed in the fiscal year 2015-16 budget revealed Friday. The double-digit increase is in line with successive increases in recent years, but analysts predict the increase will once again be absorbed by operational demands. A resumption of wider state-funded defense modernization efforts is therefore uncertain given the still uncertain state of the economy.

Reports previous to the unveiling of the budget indicated the fiscal year 2015-16 defense budget allocation stood at 772 billion Pakistani rupees (US $7.6 billion).

However, the figures unveiled Friday showed 781 billion rupees (nearly US $7.7 billion) for "'Defence Affairs and Services," an approximately 11 percent increase over the previous year's budget, according to the Associated Press.

Regardless, much of any increase will be to finance the ongoing operation against the Pakistani Taliban (TTP), Operation Zarb-e-Azab.

A breakdown of allocations to the various services is presently unavailable.

There has also been some confusion regarding the security for the recently signed Pakistan-China Economic Corridor project, with previous reports saying some 45-50 billion rupees (up to US$491 million) had been set aside for its related security, but the budget only showing a figure of 3.5 billion rupees (US$34 million).

The defense allocation amounts to another double digit percentage increase over the previous fiscal year of just over 700 billion rupees, which was later revised to 720 billion rupees.

Overall the national budget is running at a deficit of 4.3 percent of GDP, which has been exacerbated by the ongoing anti-TTP operations and subsequent refugee fallout.

Furthermore, though the economy is in reasonable shape and the government hopes for a 5.5 percent growth in GDP in the upcoming fiscal year, analysts do not expect the essentially stalled Armed Forces Development Plan, which was put in place modernize the military with new capabilities and equipment, to be restarted on wide scale.

Speaking about the latest increase, Brian Cloughley, former Australian defense attache to Islamabad, said, "I'm not at all surprised. The operating costs of Zarb-e-Azb have been enormous. Provision and transportation of fuel are major items in the budget, and air support is vastly expensive."

"And of course there can be no mention of the nuclear program, which must soak up an enormous amount, too," he added in highlighting that this would not be responsible for all the additional expenditure.

Though not entirely defense related, the budget for the Pakistan Atomic Energy Commission (PAEC), which supports major aspects of the nuclear weapons program, also has been reduced from 59.3 billion rupees to 30.4 billion rupees for the new fiscal year.

The true amount spent on defense is unclear due to programs funded by additional allocations, something which has consistently been the source of much comment and speculation.

Acquisition programs are also sometimes funded by contingency funds.

Pakistani defense budgets also consistently rise with Indian budgets, something which Pakistan's Defence Minister Khawaja Asif has previously highlighted.

The true size of the defense budget is thought to be somewhat higher, and some reports indicate 26 percent of taxes raised in fiscal 2015-16 will be allocated to defense in some form or another.

However, despite some improvement in the economy, Cloughley says the "AFDP seems to be stuck in the mud – but there's still a lot of procurement."

Much of this present procurement is from China, and Claude Rakisits, nonresident senior fellow at the Atlantic Council's South Asia Center, believes this will remain the case for the foreseeable future.

"The Pakistan military will continue to depend on Chinese loans to buy their big ticket items, as is the case of the 8 conventional, diesel-powered submarines that Pakistan is going to buy from China for $6 billion as part of the $46 billion [Pakistan-China Economic Corridor] deal," he said.

Pakistan has a long list of requirements when it comes to new equipment for all three branches of the armed forces, however, much of it from China, and analyst Haris Khan of the Pakistan Military Consortium think tank says this includes tanks such as the VT-4, which will be called 'Haider' in Pakistani service; the VN-1 8x8 wheeled APC, surface to air missiles such as the FM-90, HQ-17, and HQ-9 to establish an integrated air defense system, plus submarines and frigates.

Though this amounts to a considerable amount of very expensive equipment, Khan highlights moves made by China that will streamline funding their acquisition for Pakistan.

"Since China has established Export-Import Bank of China is one of three institutional banks in China chartered to implement the state policies in industry, foreign trade, diplomacy, economy, and provide policy financial support, these procurements from China would become more manageable for Pakistan. The Chinese EximBank is based on the American EXIM for granting financial help, this new Chinese financial institutions has generated a lot of negative blow back from the Obama administration," he said.

Though he highlights there are other acquisition programs that also include the US, and that evaluation efforts are ongoing.

"On the other hand the sale of 15 AH-1Z has been approved and the deal will be paid by Pakistani funds via Foreign Military Financing. Pakistan is still looking for surplus or even new F-16.Serbia has sent one of its APC and SPA systems for evaluation along with China supplying three of its most advance attack-helicopter WZ-10 for real time evaluation," he said.

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