Pakistan FinMin hikes military spending in rowdy budget session

ISLAMABAD (Reuters) – Pakistani Finance Minister Miftah Ismail lauded a resurgent economy and announced a big hike in military spending for the next fiscal year on Friday in a chaotic budget session marred by lawmakers’ jeers and scuffles ahead of an expected election.

Opposition lawmakers objected to the ruling Pakistan Muslim League-Nawaz (PML-N) presenting a full-year budget so close to the election, likely in July, and staged a walkout. Others tried to storm the podium to physically disrupt Ismail’s speech, but were blocked by a human chain of PML-N parliamentarians.

Pakistan’s economy has rebounded in recent years due to a drop in militant violence and vast investments by China that have helped alleviate power shortages. Growth is projected to hit a 13-year high of 5.8 percent in 2017/2018 (July-June) before accelerating to 6.2 percent next fiscal year.

“Due to historic low interest rates, the business and industry has seen growth, and employment opportunities have been created,” Miftah said, while opposition lawmakers threw papers in the air.

But a widening current account deficit and dwindling foreign currency reserves have taken some shine off the economic outlook, with the World Bank and the International Monetary Fund (IMF) warning of risks to the economy.

Ismail said the budget deficit would hit 5.5 percent for the current fiscal year, missing the government’s fiscal deficit target of 4.1 percent. He forecast the budget deficit at 4.9 percent of GDP in 2018/2019.

A government document put the total budget outlay for 2018/2019 at 5.9 trillion Pakistani rupees ($51.06 billion).

“A VERY BIG SUCCESS”

Ismail said tax revenues reached 13.2 percent of GDP in 2017/2018, up from 10.1 percent in 2012/2013.

“This unusual increase in tax collection is a very big success,” Ismail said.

A budget document said total tax receipts would reach 4.2 trillion for 2017/2018 – barely missing the official target – and Ismail projected they would jump to 4.43 trillion rupees next fiscal year.

Ismail also set aside 1.1 trillion for the defense budget, increasing it by about 20 percent from the 920 million that the government had budgeted for the military to spend. Revised figures from a budget document suggest military spending will hit 1 trillion this year anyway.

The United States has announced a suspension of military assistance to Pakistan totaling about $2 billion, though it was not clear whether this was why Pakistan’s military budget exceeded its planned outlay.

Washington suspended the assistance due to claims that Islamabad was either assisting or turning a blind eye to Islamist militants who use Pakistan’s soil as a launchpad for attacks in Afghanistan.

The huge boost to defense spending comes at a time of fraught relations between the ruling party and the powerful military, which has ruled Pakistan for nearly half its history.

Senior PML-N officials have suggested that elements of the military establishment are trying to weaken the party before the polls. The military has denied interfering in politics.

($1 = 115.5500 Pakistani rupees)

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