Many have asked in the wake of that report: why is the army chief even talking about the 18th Amendment, let alone making such strong remarks against it?
There is a context here, and the remarks actually come at the end of a long, internal debate (or argument) between the army and the civilian government that has been taking place largely behind closed doors thus far.
On a couple of occasions, it has broken into public view, though it did not get much attention. This lack of attention means to most people that the remarks of the army chief appear to be coming out of nowhere.
The first we heard of a debate (or an argument) taking place within the government between civilian and military authorities over budgetary resources was back in January 2015, when the then finance minister Ishaq Dar went on the air in various shows talking about an extraordinary expenditure of Rs100 billion that had come up due to “security-related expenditure and repatriation of IDPs”. It was called an “extraordinary expenditure” because it was not budgeted for.
It is impossible to know what all the funds were going to be used for. What we know is that a demand had come, and the finance minister was struggling to find the resources. The sixth review with the IMF was coming up later that month, and he had no choice but to ask for a relaxation of the budget deficit target which was set at 4.9 per cent of GDP. He said he was going to ask for this ceiling to be raised to 5.3pc instead.
It is impossible to know what the funds were going to be used for. What we know is that a demand had come.
As it turned out, the IMF did not agree to the relaxation at that meeting. “The target remains at 4.9pc this fiscal year” the mission chief said after the meetings.
Dar had to look elsewhere for the funds since under the IMF programme, the government was already committed to reducing the budget deficit by another 1pc of GDP, while revenues were slowing due to declining oil prices, and expenditures had already come in higher due to higher than expected interest payments.
The matter was raised again a month later in what seemed to be an out-of-the-ordinary meeting with Fund staff held in Dubai. A few weeks earlier, ISPR had put out a press release saying a special CPEC security force was being raised. In April, a day after Chinese President Xi Jinping’s visit to Pakistan, a follow-up release said the force would consist of nine army battalions and six wings of civil armed forces.
By June, when the budget for fiscal year 2016 was announced, the demand had been accepted. Budget documents showed the amount of Rs55bn for TDPs and Rs45bn for operating expenses for “security enhancement”. Again, it is important to emphasise that it is very difficult to say what these funds were actually spent on since they are not subject to any transparent or independent audit.
“Due to extraordinary circumstances, we will incur one-off spending of up to PRs 100 billion … on security enhancements related to fighting terrorism and resettlement of internally displaced persons” the government told the Fund in the letter of intent signed June 12, 2015.
Throughout the government was trying to tell the Fund that the amount being asked for was a “one-off expenditure”, largely owing to Operation Zarb-i-Azb. The item would disappear once the operation ended, the Fund was told. But it was not to be. To this day, the allocation appears on budget documents, though reduced to Rs90bn.
This is not the only example, but certainly one that has left a paper trail.
Throughout this episode, the finance minister’s argument was that the last NFC award, which is the other side of the 18th Amendment, has severely restrained the government’s fiscal space and ability to entertain extraordinary requests for fiscal resources.
Defence spending as a proportion of net federal revenues (that portion of total revenues left in the government’s hands after transfer to the provinces) has risen from 25pc to 31pc since the NFC Award starting shifting growing proportions of the state’s fiscal resources to the provinces. This is despite a near tripling of the total amount allocated for defence spending in the budget between fiscal year 2009 and 2018.
None of this is to argue against defence spending. Of course the country has been at war through this entire time and there will necessarily be an accompanying cost.
But throughout the government documents where it has to explain its fiscal position to the IMF, a number of things keep coming up.
First is the demand for increasing the deficit ceiling to allow for security-related expenditure, which is only grudgingly accepted by the Fund, as well as the generous adjustors for all spending on social safety nets, particularly the Benazir Income Support Programme (BISP).
By August of last year, this wrangling broke into the open as the army chief went public with remarks on the economy, where he said that “security is the foremost business of the state” and in this world security “does not come cheap”.
Dar responded saying that all requests for material resources have been accommodated, but security must share resources with development as a leading priority of the state.
Today, we have a fuller exposition of where all this is set to go. As the security establishment’s demand for access to the material resources of the state continues to increase, everything that stands in the way must be bulldozed aside.
This apparently includes the 18th Amendment as well as BISP, whose generous adjustors in the fiscal framework have probably been viewed by the military authorities with some envy.
Published in Dawn, March 22nd, 2018