ISLAMABAD: Pakistan plans to tap a portion of provincial funds to help meet its defense requirements over the next three years, Finance Minister Muhammad Aurangzeb said on Saturday.
The statement came a day after Pakistan unveiled a Rs18.77 trillion ($67.49 billion) federal budget and increased its defense spending by around 18 percent to Rs3 trillion ($10.8 billion) for the next fiscal year, citing its commitment to national security.
Aurangzeb told a post-budget press conference on Saturday that the arrangement for the use of provincial funds for defense expenditure was in place for the current year, adding that talks were underway on a three-year contribution framework.
“We are absolutely grateful for all the provinces, the way they have sort of stepped up in helping us for some of the more pressing needs, some of those have been reflected in the defense budget,” he told reporters in Islamabad.
“For this year that arrangement is in place, and from our perspective it’s a three-year discussion.”
The government’s new fiscal plan comes amid a rapidly evolving regional threat environment. Islamabad has for months been engaged in border skirmishes with Afghanistan over a rise in militancy in Pakistan’s western regions, while tensions remain high with New Delhi following an intense, four-day India-Pakistan military conflict in May last year.
Pakistan allocated Rs2.55 trillion ($9.17 billion) for defense expenditures in the outgoing fiscal year.
The cash-strapped government plans to freeze provincial transfers for three years to reallocate financial resources for security and relief measures, which Aurangzeb said would put the economy on the path of sustainable exports-led economic growth.
Pakistan expects 4 percent growth next year, starting July 1.
“We will move from stability toward growth,” the finance minister said.
Information Minister Attaullah Tarar, who was present alongside Aurangzeb at the briefing, called the fiscal plan for the next year a “relief-oriented budget.”
The budget comes at a time when Pakistan is treading a long path to economic recovery under a $7 billion International Monetary Fund (IMF) program that has helped Islamabad rebuild foreign exchange reserves, reduce inflation and narrow fiscal imbalances through a series of reforms, including higher taxes and cuts in government spending.
The new fiscal plan included tax cuts on exports, salaried individuals, property transfers and international use of bank credit and debit cards as part of the government’s broader relief measures.
“We are in a constant consultation mode,” Aurangzeb said, when asked by Arab News how the government convinced the IMF for tax relief in the budget.
“We are taking it (program) forward with their consultation.”
