Pakistan recently celebrated its Republic Day with the standard military parade, air show, and a host of other activities to show off to dignitaries. Understandably, the holiday is a big deal for the nation, but having the military front and center with such extravagance perhaps isn’t the best idea. The government is in a dire state of financial trouble and the military is largely to blame. The signs of economic burdens have been present for sometime; inflation is at a four-year high of over 8 percent, and Prime Minister Imran Khan even publicly declared the need for foreign investment.
Two years ago, Pakistan was elevated to ’emerging-market’ status and joined the Msci Emerging Markets Index, but last week, it came to light that Pakistan would likely be put on review to be downgraded back to ‘frontier’ status. Nearly $44 billion worth of equity has disappeared since it joined the index. The only index that performed worse in that timeframe was the Argentina S&P Merval Index. Although it will take time for a review of the current state of affairs, Pakistan’s immediate future seems quite clear.
The statistics paint a picture of the nation’s poor fiscal health. One-third of Pakistanis are blow the poverty line, the Pakistani rupee has lost 30 percent of its value in two years, the country is ranked 150 of 189 on the Un Human Development Index, and debt outweighs reserves by 10-to-1. Yet amidst all of this, the military received a 20 percent increase for its budget, one that already officially comprises over 20 percent of the government’s expenditures.
Part of the reason that the Pakistani military drains the economy so much is that it is not only a security force – it also operates 50 businesses. One, the Fauji Foundation, generates $1.5 billion annually across a range of industries including food, real estate, and communications. When the military is more focused on generating a profit which undoubtedly enriches only the upper layers, there exists a massive incentive to pull more from the public resources to embark on new ventures.
This year, tensions between Pakistan and India rose when Pakistan claimed to have shot down an Indian fighter pilot, after which it decided to retaliate. Events such as this stoke the military fervor and creates a population that doesn’t mind the government spending wildly on the armed forces while ignoring education and basic social programs. As long as there is an enemy at the door, occasionally attacking, then the military should be unquestionably funded in all of its pursuits.
To stymie the budgetary bleeding, the nation continues to court foreign investors. Saudi Crown Prince Mohammed bin Salman recently pledged $20 billion for infrastructure and the UAE also signed agreements. Khan’s trip to China last year will also likely pay off as it is always looking for new markets and especially ways to expand into the Middle East.
There are, however, some rays of hope for the Middle Eastern nation. Next month, Khan will deliver a report on an oil and gas discovery. If the find is as big as experts estimate, then his government will be able to reduce the amount of imported petroleum. Currently it is only able to produce 15 percent of its consumption. How much of this benefits the average Pakistani citizen will remain to be seen. If it’s anything like the copper and gold mine that the government is developing, then the military will reap most of the rewards as it creates yet another new venture.
Through the Frontier Works Organization, the army has become a powerful engineering firm that has also built a “substantial” mining capability recently. It was the military that put Khan into power so it will come as no surprise that he will reward it generously to hold onto his position.
“They’ve understood that the economy is important for having a strong military,” said Ayesha Siddiqa, author of Military Inc. “Control of the economy also gives the military a handle over expanding their business interests.”
Chief Minister Sardar Unman Buzdar recently declared a war on corruption as he blamed it for bankrupting Islamabad. Buzdar called for transparency in the government and said it is possible under Khan’s government to turn Pakistan into a wonderful place. Any conversation about corruption in Pakistan is meaningless without analyzing the military’s role in it. While foreign investment will keep Pakistan’s head above water for a time, it is ultimately selling itself out while neglecting the real problem and as this money continues to flow the military, the nation never improve.