Pakistan's economy must escape the clutches of its armed forces

Mint

6 hours ago

We'll eat grass but will get our own bomb." This vow made by Pakistani prime minister Zulfikar Ali Bhutto wasn't just rhetoric; it became his nation's strategy. Five decades later, Pakistan spends skewed sums on its armed forces, while its formal economy stagnates at a low proportion of its GDP. With a burgeoning defence budget, its anti-India doctrine is self-defeating.
In 2025-26, India's allocation for defence is ₹6.8 trillion (about $79 billion) or about 1.9% of GDP; Pakistan's budget for 2025-26 has upped its core defence outlay by 20% to about $9 billion while cutting overall expenditure; with its military pensions taken into account, its total spending would be nearly $12 billion, which is well above 3% of its GDP.
Islamabad's defence bill sucks in revenue and weakens its credit profile: half its external borrowings over the last decade serviced either past bailouts or military imports. This strategy, coupled with politically 'untouchable' energy subsidies and a minuscule tax base, creates conundrums for Pakistan.
Its debt spiral combines with currency depreciation to lower the efficacy of every successive bailout, even as rising energy costs hold its industries back. The military's dominance of fiscal policy ensures that the bulk of its population lives in penury, while the army enjoys comfort and control.
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A security state doesn't just impose conformity on people; it also crushes entrepreneurship and innovation. Most of Pakistan's talented professionals flee the country. Its net outward migration touched 800,000 people in 2024. A weakening currency and poor state of social spending leave little room for optimism among professional Pakistanis. When perpetual conflict becomes a nation's narrative, the rational response of citizens is to exit.
The Pakistan Army's obstinacy in pursuing parity with a rival ten times its economic size costs the nation dearly. For instance, if its Army had not sabotaged the 1999 peace talks, the Lahore–Delhi freight corridor alone would have generated cumulative trade worth $10 billion, according to the Asian Development Bank.
With Himalayan peaks, Sufi shrines and Mughal forts, Pakistan could have been the Morocco of South Asia as a tourist destination. Instead, it gets fewer foreign visitors than Bhutan. Pakistan could also join regional value chains, such as ship repairs for India's massive merchant navy, or integrate Sialkot's famed sports equipment clusters with Indian e-commerce platforms. But Pakistani hawks refuse to consider rapprochement.
That defies lessons from history. The Vietnam War inflicted casualties in tens of thousands on the US and millions on Vietnam. Hanoi also fought China in 1979, again incurring casualties. Yet, Vietnam now has trade partnerships with both former adversaries, propelling it to prosperity. Similarly, countries that devastated each other during the two World Wars joined hands to leverage the power of a common EU market. The key is to focus on economics and be patient with geopolitical differences.
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From Pakistan's perspective, deterrence is necessary. But this need not be based only on expensive platforms like F-16 fighter jets. Creating economic networks of interdependence, through supply chains and infrastructure, could give other nations a stake in its security.
Another myth Rawalpindi's generals perpetuate is the need for 'strategic depth' against India. The real depth any modern nation needs is fiscal—or the wherewithal to absorb shocks. In covid's aftermath, India was able to deploy huge sums as a fiscal stimulus, while Pakistan struggled. When a major crisis hits, it's financial strength that protects citizens, not fighter aircraft.
Politically motivated jingoism aside, future-focused statesmen of the region must realize the social, political and demographic powder keg Pakistan is sitting on. The subcontinent is grappling with huge problems that require combined resources and effort. The region hosts the world's largest number of malnourished and stunted children; also illiterate and unemployable people. Water shortages, climate change, pollution and loss of arable land are ticking time-bombs whose price will be paid by future generations.
There are incentives for Pakistan to alter course. Gulf sovereign funds are looking for high-yield investment opportunities. Climate funds are also on the lookout for green projects. Pakistan could work hard to attract such money.
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Besides, both the US and China have stakes in Pakistan. The former needs a strategic foothold in the region with proximity to China, Iran, Russia and Afghanistan, while the latter needs stability in Pakistan to safeguard its Belt and Road Initiative. Both these powerful countries could exercise leverage over Pakistan. India too could work with Islamabad on water management projects and symbiotic industries.
If Pakistan sticks to its current course, it will face yet another crisis of foreign exchange solvency, placing it in need of yet another IMF bailout. Can it afford another cycle of gloom, with its poor bearing the brunt of a doctrine coined by elites? If Pakistan's young appreciate how this doctrine works against the nation and choose to reverse it, the country could be an exporter of farm produce instead of having to eat grass.
The author is former CEO of the National Intelligence Grid, distinguished fellow at Observer Research Foundation and author of 'Everyman's War'.