Pak hikes defence budget by 11%

Cash-strapped Pakistan has hiked its defence budget by 11% from Rs 627 billion to Rs 700 billion with the Finance Minister saying the government cannot be oblivious to national security challenges amid a surge in Taliban insurgency.

Ishaq Dar made this announcement as he presented Rs 3.9 trillion budget in the National Assembly yesterday.

Dar said the government would provide "all necessary resources" to the armed forces, despite efforts to rein in government spending.

He said that the country cannot be oblivious to national security challenges.

The allocation for defence has been proposed at Rs 700 billion for the financial year 2014-15. Yesterday PTI had inadvertently reported the figures in dollars.

The hike in defence spending came amid reports that the army may launch a full-scale operation against Taliban insurgents hiding in tribal areas bordering Afghanistan as peace talks failed to make any headway.

Dar termed the budget as business friendly and said it would help the government to attract both domestic and foreign investment into the manufacturing sector.

"We have had to fix a broken economy," Dar said. "We have tackled tough challenges. The country is on a path of growth."

Last September, the International Monetary Fund (IMF) had approved a USD 6.7 billion loan for Pakistan amid a continuing economic crisis in the country.

Dar said tax rebate will be allowed till 2017 in order to attract foreign direct investment in manufacturing, construction and housing sectors.

The government also decided to set up Pakistan Land Port Authority to transform land ports into efficient facilitators of trade, which will help boost exports.

The Finance Minister announced various measures to strengthening textile sector for promotion of its exports.

Dar said the budget strategy is embedded in a three-year medium term macro-economic framework with increase in GDP growth rate up to seven per cent by the end of 2016-17.

He said the government has planned to increase public sector development programmes up to Rs 525 billion in the coming financial year, which shows 24% increase as compared to the previous year.

He said government has been successful in bringing down budget deficit from 8.2% to 5.8% during the last one year and is hopeful to further reduce to 4.9% in the coming year.

The Finance Minister also presented the Finance Bill 2014-15 before the house for discussion and approval.