Are Defense Expenditures Pro Poor or Anti Poor in Pakistan? An Empirical Investigation

Recent increase in defense expenditure (Dexp hereinafter) in Pakistan due to increase in internal security and terrorism is an issue of concern to many Pakistani and other stakeholders in the Pakistan economy. Presently, internal security issues especially that of the increasingly violent homegrown terrorism is forcing increasing financial cost on government‘s expenditure towards defense sector. According to Budget documents, defense budget amounts to Rs 700. 2 billion for the 2014-15 fiscal year compared with Rs 627.2 billion allocated in the preceding fiscal year, showing an increase of Rs 73 billion. However, these figures do not include Rs 163.4 billion allocated for pensions of the military personnel.1 In addition to this, military would also be given Rs 165 billion under the contingent liability and Rs 85 billion under the Coalition Support Fund (CSF). This means that in reality Rs 1113 billion has been allocated for the military which is about 28.2 percent of the country‘s total budget [Sheikh and Yousaf (2014)]. This has led to diversion of the money needed for much-needed development projects, as the share of current expenditure in total budgetary outlay for 2014-15 is 80.5 percent.2 This diversion of funds has economic implication since some social sectors are likely to suffer in Pakistan