ISLAMABAD, 6 June 2006 — Pakistan hiked its defense allocation by 28.4 percent for the year 2006-2007 in the federal budget unveiled by the Minister of State for Finance Omar Ayub Khan at the National Assembly yesterday. The minister attributed the increase to the geo-strategic situation around Pakistan, including the raging war on terror in neighboring Afghanistan.

The Defense Affairs and Services budget for the year 2005-2006 was Rs.1.435 billion. For 2006-2007 the allocation is Rs.1.724 billion — the amount does not include spending by the Defense Production Division, Civil Aviation, procurement of new weapon systems and pensions of servicemen.

The budget, with an outlay of Rs.1315 billion, shows an increase of 19.7 percent compared to last year. Resource availability during 2006-2007 is estimated at Rs.1,100 billion against Rs.980 billion of the previous year.

Overall expenditure during 2006-2007 has been estimated at Rs.1315 billion of which current expenditure is Rs.880 billion and development expenditure Rs.435 billion. Current expenditure shows a decrease of 4 percent over the revised estimates of 2005-2006.

Omar Ayub said the bulk of expenditure has been placed under the General Public Services category. The expenditure against this head has been budgeted at Rs.504,288 million (57.3 percent of current expenditure) as compared to 563,673 million in the revised estimates and 503,114 million in the budget estimates of 2005-2006.

External resources for the period 2006-2007 are estimated at Rs.233,914 million in terms of project loans, program loans, foreign currency bonds, other aid and assistance.

Total foreign aid for development and non-development projects is estimated at Rs.239,496.358 million. This will cover projects and rehabilitation work in Azad Kashmir and the North West Frontier Province.

The increase in development spending is projected at 52 percent and billions of rupees would be spent on subsidies for foodstuffs.

An amount of Rs.415 billion of the total outlay would be allotted to public sector development — a 52 percent increase from the Rs.272 billion allocated in the budget for the current fiscal year ending June 30. The new figure includes Rs.50 billion for reconstruction of areas devastated by October’s 7.6-magnitude quake.

The government announced subsidies on some basic foodstuffs — including Rs.2.5 billion on the import of lentils — to be sold at cut price in state-run utility stores, to help ease the impact on consumers of inflation, currently at around 8 percent.

“The people of Pakistan have the foremost right on Pakistan’s resources ... the budget I am going to present is a budget for the poor people of Pakistan. It is a budget of relief,” Omar told the National Assembly, amid booing by opposition lawmakers.

He forecast Pakistan’s economy would grow by 6.6 percent this fiscal year, down from 8.6 percent last year, which was the fastest pace of growth in two decades.

Earlier a Cabinet meeting chaired by Prime Minister Shaukat Aziz approved the budget. As the National Assembly went into session leader of the opposition Maulana Fazlur Rahman said the budget documents were leaked to various newspapers and private TV channels.

When Omar Ayub began his speech the opposition staged a walkout. Omar said over 400,000 people will get employment. He said previously minimum wages were fixed at Rs.3,000, now the amount has been increased to Rs.4,000. He announced 15 percent increase in the salaries of government employees. Omar Ayub said the budget envisages allocation of sufficient funds for the provinces.

The total share of provinces would be Rs.378 billion during 2006-07, he said.