Army budget reduced to pave way for IMF deal. Pakistan has reduced the armed forces development program by Rs72 billion, which is one-fifth of the allocation that was made on June 10.
This cut is necessary to meet a major condition of the International Monetary Fund (IMF) regarding achieving a primary budget surplus in the new fiscal year.
A primary budget surplus of Rs153 billion, or 0.2% of the national output, is one of the core conditions of the IMF for the revival of the bailout package.
Finance Minister Miftah Ismail is hopeful that a staff-level deal can be achieved before the end of this week.
The original budget provision for the armed forces development programme was reduced from Rs363 billion to Rs291 billion, according to the revised budget that was approved by the National Assembly.
The government has announced a cut to the armed forces development programme of Rs72 billion, which is nearly 20%.
This is in addition to the regular defence budget, and is the second time in as many years that the Army budget has been slashed. The cuts have been attributed to fiscal constraints and limitations imposed by the IMF.
The previous government had allocated Rs340 billion for military expenditure during the last fiscal year, but only Rs270 billion was actually spent, according to budget documentation.
When contacted, an official from the Ministry of Finance said that the armed forces development programme had to be reduced in order to bring overall expenditures down to a level where the primary budget surplus target set by the IMF could be achieved.
The government has set the primary budget surplus target at Rs153 billion or 0.2% of GDP. This target is based on the projected surplus of Rs750 billion from the provincial budgets.
However, the provincial budgets do not currently reflect this surplus, and the IMF has asked the government to secure the provincial endorsements for this target through memorandums of understanding (MoUs).