1.

INTRODUCTION

The amount from country’s budget dedicated for military maintenance entirely is

known as military budget or Defense budget. And it shares a causal relation with

the economic growth of the country.

1.1 OBECTIVES

Following are the Objectives of our Report:

 To look for the relationship between the Military budget and economic

growth of Pakistan.

 To estimate how much Military budget takes up the entire Budget of the

Country.

 To find out why the current relation between defense spending and

Economic growth of Pakistan exist.

 To look for ways to reduce the fixed cost that military budget requires so it

may have an impact on general budget as a surplus.

1.2 RESEARCH QUESTIONS

Our report revolves around the problems that Pakistan faces in terms of national

security which as result requires a huge expenditure on defense budget. This

affects the economic growth of Pakistan adversely. According to many

 researches and studies on the relation between defense spending and Pakistan’s

economic growth, it has been revealed that military expenditure is a huge drag

on state’s development. And so the purpose of our report is to find out the

reasons and solutions to these problems.

2. LITERATURE REVIEW

(Dawn, 2006) In this dawn news article important points are being discussed. As

experience has shown, a high defense spending often tends to retard socio-

economic development and undermines national integration and this exactly what

happening in Pakistan. The potential negative effects of the “ security first”

approach on economic growth can be assessed in terms of insufficient expenditure

on the social sectors (education and health), curtailment of public investments,

development of trade imbalances, increased indebtedness, worsening trade

imbalances etc. The military spending has continued to be at the cost of

development expenditure. Some authors like, Brzoska (1983), have pointed to

military expenditure as being an important variable in explaining the rise of foreign

debt in a number of developing countries.” In Pakistan debt repayment and debt

servicing has increased the non-development spending. According to one study,

"Defense expenditure in Pakistan has a negative impact on GDP growth when it

increases to over 6.5 per cent of the GDP for a decade and/or more. During the
1978-88 decade, this threshold had been crossed with defense expenditures

averaging 6.8 per cent."Pakistan's focus on defense has been disproportionately

much more than the other two important social sector variables, health and

education as other countries of the world also spend considerable amount on

defence sectors but they also spend a major amount on resources and health and

education sectors.Pakistan ranks 9th among 117 market economies in terms of

government’s expenditure on defence as percentage of total expenditure. If not

managed properly in the coming years, military spending will definitely be at the

cost of illiteracy, poverty and under-development. This will ultimately harm

national integration.

(Fiaz Hussain) The author in this article says that since independence 1947,

Pakistan on average has spent Rs.83.13 billion (on average 5.97 percent GDP) on

defence sector and during last fiscal year, 2012, Pakistan spent Rs.507.159 billion

on defence sector which constitutes 5.3 percent of GDP and 12.9 percent of total

federal government expenditures. Unfortunately, as we all know that Pakistan is

still among the poorest countries and the per capita gross national income for

Pakistan was US$ 1261 Whereas Pakistan still faces health problems and there are

no proper health sectors here in Pakistan. On the other hand Pakistan does spend a

considerable amount on such military expenditures but for other major problems it

doesn't spend much amount. For Policy purposes it is very important to determine
the channels by which Dexp influence the economic growth process. The use of

Government expenditures as a fiscal policy tool is well established; however the

usefulness of defence expenditure as a tool of fiscal policy especially for

developing countries is yet to be established. Pakistan’s defence burden on average

has been 5.97 percent.

 3. RESEARCH METHODOLOGY

3.1 RESEARCH TYPE

Our report is exploratory; exploring the problems, reasons and the possible

solutions to the defense spending and its effects on Pakistan economic growth.

3.2 DATA SOURCE

(ANWAR & RAFIQUE, 2012) Our data source says that, on average the military

spending had been 6.62 percent of GDP until 1999 but in 2000 these spending

declined from 5.1 to 4.1 afterwards it started to rise from 2001 to 2003 and then

fell again it was because of the foreign aid after the war on terror. The state

security justified the high spending on military due to potential threats from inside.

After the partition of Pakistan and India the rivalry began the two countries had

same political strategies’ and budgetary mechanisms but differ in religion and

foreign policy which was the base of the conflicts. The government and military of

Pakistan perceived India as a threat to their sovereignty. In 1980 the president and

general Zia ul haq and the head of army refused to reduce the defense expenditure

as they were really insecure from India they said that we cannot fight the nuclear

submarine and jets with sticks and stones so we are not in a position to reduce our

defense expenditure.
3.3 DATA ANALYSIS

Our report will now be looking further into the topic with detailed analysis of the

facts and figures and how the problems can be solved.

4. DATA ANALYSIS

After this detailed look on our chosen data sources and studies we have

successfully establishes the following points

 As the military spending or defense spending has been one of those sector of

budget spending that has always received a large amount of expenditure of

state’s budget.

 Did face a fluctuating up and fall sometime but on average it has always

been high.

 And so affect Pakistan’s economic growth in a more negative manner

 The most prominent factors of being affected much drastically are health and

eduation.

 The reasons for this are mainly high security threat to Pakistan externally as

well internally.

 There is a trade-off relation between Pakistan economy and military

spending.
According to the data that we studied, there are so many reasons that serve

as explanation for why the government of Pakistan spends so much on

military budget. Since the partition of India and Pakistan both countries

consider each other as their potential threat but it’s more on Pakistan’s part

since Pakistan is the one that has been a part of India and later it sought for

independence which was opposed by india largely. So for Pakistan India has

always been a been major threat. Since then many both countries has fought

many wars that made new established Pakistan’s state more delicate. Then

later on during time of General Zia, Pakistan made alliance with USA to

fight Soveit invasion of Afghanistan and for this purpose troops of trained

militant were sent to Afghanistan. And borders were opened for Afghan

refugees without any proper process of registration and trillions of

unregistered regufees sought shelter in Pakistan –this gave rise to internal

security threats. While on the other hand when those militant were ordered

to evacuate Afghanistan due to international pressure, leading with no

guidance those militants came back to the remote area of Pakistan,

Waziristan. And then Pakistan started facing insurgencies in form of

Taliban, Al-Qaeda and other such militant troops. Due to these constant

security threats externally and internally the military of Pakistan needs to be

equipped and updated all the time which required extra amount country’s

budget.

So these reasons accumulated in raising the military budget without the

realization that this will have an adverse effect of country’s economy as it

retards socio-economic development and national integration. In this

negative relation between both the variables that resembles a trade-off

relations the economic development of Pakistan is the cost that has to paid in

order to gain military budget and due to this the there is also a negative

impact on GDP.

After the study of the collected data, the only solution to this economic

hurdle seems is to build a good relation with the countries that are bordering

the country and pose a national threat to it in which Include maintaining a

positive relation with Indian and Afghanistan through not only just dialogues

but increasing the horizons of trade that will in turn lessen the chances of

possible security threats and thus there would be less requirement of

spending so vastly on defense budget. Doing this will not only decrease

national threat and will increase economic growth but it can also help in

enhancing the law and order situation and the budget of law enforcement

agencies will increase too.

5. CONCLUSION

Pakistan military receives the largest amount of the budget which in result has a

negative impact on our overall economy that has caused a downfall in our

education and health sector as well as has a negative impact on our GDP. The

reason why Unaccountable amount of budget has been reserved for military

spending is because Pakistan is being threatened internally as well as externally by

the rival countries. if we look at the state’s position we cannot just reduce our

defense expenditure, as there can be a war break out and if we end up in a position

of war we need all the right equipments as we cannot fight with sticks and stones

but to reduce the threats we can try to build goodwill relationships and increase

trade with the rival countries so that our chances of being attacked would lessen to

some extent and the fear of threats and breaking out of war would go down and the

budget can be evened out, which will result in the increase in state’s socio

economic development.
6. RECOMMENDATION

Both India and Pakistan are the countries with great economic backgrounds but the

conflicts were always there. Those conflicts include less developmental

expenditure and higher military expenditure. The trade could be increased in India

in order to make our relations better and end the rivalry India gave the status of

most favorite nation to Pakistan but still Pakistan could not reciprocate it defense

no doubt is the basic element of national security but the policy makers should also

consider the energy social and economic elements of the security of the nation. The

current defense security is high due to the nontraditional warfare but it should be

fixed in order to avoid security paradox. The accountability and transparency

should be the qualities of the defense budget it should be on the top priority list of

the annual budget sheet. The developmental pace requires high GDP growth and to

reduce poverty. Poverty is becoming a threat day by day to the nation and it would

be a disaster in future if we could not stop ourselves from fueling the conflicts in

social structures
5. REFERENCES

ANWAR, A., & RAFIQUE, Z. (2012). DEFENSE SPENDING-ECONOMIC GROWTH. Pakistan Economic and

Social Review.

Dawn. (2006, december 25). https://www.dawn.com/news/224868. Retrieved december 25, 2017, from

https://www.dawn.com/: https://www.dawn.com/news/224868

Fiaz Hussain, D. S. Is Defense Expenditure Pro Poor or Anti Poor in Pakistan? An Empirical.