Chartbook 127 – The World Bank’s Global Take On The 1970s, Stagflation And Debt Crises.

Chartbook, Featured
June 9, 2022

This week the World Bank announced that it is slashing its forecast for 2022 global growth to 2.9%, down from 5.7% in 2021. This is the sharpest deceleration in a post-recession recovery in 80 years.

The baseline scenario projects a slight re-acceleration 2023, but in the event of a severe Fed tightening, an energy embargo triggered by the war and continuing COVID issues in China, that number could fall to as low as 1.5 percent.

With inflation also running at record rates, comparisons are being drawn to stagflation of the 1970s. Heavy-weights like Larry Summers and Olivier Blanchard have been to the fore in warning that inflation is now so rapid that to bring it under control may require a draconian monetary policy intervention.

This may well prove alarmist. Not only are the data on the degree of inflationary momentum ambiguous, but in the debate so far they are drawn overwhelmingly from the US and Europe.

The World Bank in the latest report on Global Economic Prospects for June 2022 takes a broader view. In a Special Focus section they take on the theme of Global Stagflation and the comparison to the 1970s. Their analysis, they claim, is the first to provide a systematic comparison of the current juncture with the stagflationary period of the 1970s. The previous literature has mostly focused on a comparison of high inflation during that period with today’s inflationary challenges and studied the role of monetary policy and commodity price shocks in driving inflation in the two periods. This study considers the stagflation of the 1970s and examines the role of fiscal policy and broader structural differences in explaining weak output growth and high inflation. Second, in contrast to much of the earlier work, which has focused on the United States, this study presents a global perspective by examining the evidence of stagflation, and the challenges posed by it, for a broad set of countries.5 The threat of stagflation is global since the current combination of high inflation and weak growth is highly synchronized across many countries. Third, this Focus explicitly links the Emerging Market and Developing Economy debt buildup of the 1970s that culminated in the debt crises of the 1980s to the stagflation of that era and its eventual resolution in advanced economies. The 1970s witnessed the first global debt wave fueled by a prolonged period of accommodative monetary policies in major advanced economies. Since 2010, the global economy has been experiencing the largest, fastest, and most synchronized debt wave of the past five decades amid a protracted period of monetary policy accommodation. The study considers the lessons of the debt accumulation of the 1970s for the current debt wave.

As the World Bank remarks,

The current juncture resembles the early 1970s in three key respects: supply shocks and elevated global inflation in the near-term, preceded by a protracted period of highly accommodative monetary policy in major economies, together with recent marked fiscal expansion; prospects for weakening growth over the longer term, which echo the unforeseen slowdown in potential growth of the 1970s; and vulnerabilities in EMDEs to the monetary policy tightening by advanced economies that will be needed to rein in inflation.

The energy price surge has rocked the entire world economy. In real terms the oil price shock of 2022 is in the same ballpark as 1979. The gas price shock is dramatically worse than anything previously seen.



From a global point of view it is clear that though inflation has ticked up in recent months, following decades of lowflation, we are still a long way from the great inflation of the 1970s.

World Bank SF1.1 A.

In both the advanced economies and emerging and developing economies, the World Bank analysis shows that the drivers of inflation in 2021-2022 are a cocktail of supply constraints, a demand shock and a surge in oil prices. In neither the advanced economies nor the emerging market world, are supply factors – the famous supply-chains – clearly dominant.

And despite this variety of shocks, long-term inflation expectations so far remain anchored both in the advanced economies and in the emerging market world.


In the US, inflation expectations have significantly risen, especially over the 12-month time horizon. But they are no more than half the levels seen in February 1980.



Wage inflation, which was a driver of wage-price spirals in the 1970s, is far more muted today, at least outside the US.



In the US, wage inflation is rapid, but remains behind price inflation, and, as the World Bank somewhat coyly remarks, in institutional terms there are huge differences between the 1970s and the present day. “Rigidities” are less pronounced, which is an unfortunate economist’s way of talking about the decline of organized labour and workers’ bargaining power.

Part of the reason that markets are as relaxed as they are is, that if the Fed and the other central banks see fit to take action, they have plenty of scope to do so before needing to resort to Volcker-style shock therapy.

Right now, interest rates all over the world are in negative territory. In the US they are deeply so.

In the 1979-1981, the initial impact of the Volcker shock was simply to raise rates to the level of inflation. Then, as inflation rapidly slowed, interest rates surged to historic highs. We are a long, long way from that today.



What worries the World Bank is what happens if the Fed were to actually make use of its leeway to raise rates. Here too, the 1970s have lessons to teach. The World Bank’s worry is of a major emerging market and developing world debt crisis.

At that time, as the World Bank writes,

Low global real interest rates and the rapid development of syndicated loan markets encouraged a surge in EMDE debt, especially in Latin America and many low-income countries (LICs), especially in Sub-Saharan Africa. In Latin America, total external debt rose by 12 percentage points of GDP over the course of the decade while, in LICs, it rose by 18 percentage points of GDP. Much of this debt was in foreign currency and short-term, as capital flowed from oil exporters to EMDEs with large fiscal and current account deficits (figure SF1.5.C).



When the Volcker shock hit, it delivered a savage blow to emerging market borrowers, turning the 1980s into a decade of debt crises. The litany of financial crises in the 1990s was even worse, but now it was banking crises that were to the fore.



Despite COVID the number of emerging market and low-income country debt crises has never returned to the 1980s peak. But debt accumulation in the last fifteen years has been dramatic and a larger share of borrowing is susceptible to variable interest rates. From a share of c. 20 percent in the early 2000s, the variable rate component has risen to 35 percent.

Even if dollar interest rates are still a long way away from imposing a real squeeze, the dollar itself poses problems.

In the 1970s following the collapse of the Bretton Woods system, the dollar devalued. By contrast, since the start of the Russian invasion of Ukraine, the dollar has strengthened sharply, exerting significant pressure on everyone who has borrowed in the currency, whether interest rate go up or not.



Those worst affected are emerging market and developing economies that are also commodity importers. They are being squeezed both by the appreciation of the dollar and the rise of commodity prices. And the bond markets are reacting. The spread paid by EMDE sovereigns that are commodity importers have surged by almost 250 basis points. Commodity exporters have seen a basis-point increase in their spreads of less than 100 points.

As far as the 1970s analogy in the advanced economies is concerned, the general impression conveyed by the World Bank’s analysis is that the similarities are more superficial than real. The World Bank expects global CPI inflation to fall back below 3 percent in 2023. 

But the real question is what price will the world economy pay? As far as emerging market and developing market debt is concerned, the burden is far larger than it was in the 1970s. So too, of course, is the sophistication of their governance institutions. What Daniela Gabor calls the “Wall Street consensus” has sunk deep roots. The much-feared global COVID debt crisis of 2020 failed to arrive. Instead the accumulation of new debt went on. We may get lucky. There may be no tapering disaster in 2022-2024. But the World Bank alerts us to where the most serious risks lie. Along with the distributional question in rich countries, the main focus should be on ensuring that the tightening in the global dollar system does not impose intolerable pressure on its weakest links around the world.

***

Robert Reich: How Biden Gets Re-Elected In 2024 – OpEd

File photo of US President Joe Biden. Photo Credit: Official White House Photo by Cameron Smith

 June 11, 2022  

By Robert Reich

My friends, I’m going to press the pause button on today’s news — including the House January 6 hearings — and try to answer a big question that hangs over American politics right now like a sword of Damocles: Does Joe Biden have a snowball’s chance of being re-elected in 2024?

With his current approval rate in the cellar, most pundits assume no (at age 81, he’d also be the oldest person ever elected president, slightly exceeding the typical American’s lifespan). The conventional thinking goes that if he gets the Democratic nomination for 2024 (a big if), Biden will be demolished by Trump (or a Trump surrogate like Florida governor Ron DeSantis) — putting America at the mercy of an even crazier authoritarian than Trump version 1.0.

That’s way too simplistic. Biden’s approval rating is now at around 40 per cent. Ronald Reagan was polling at about the same at this point in his presidency when he was grappling with inflation and the inevitable buyer’s remorse that voters feel a year and a half into a presidency. Two and a half years later, Reagan won 49 states in his re-election bid against Walter Mondale. (Reagan was then 73, just short of the typical American’s lifespan at the time.)

As for Trump, his popularity has plummeted since the 2020 election – a casualty not just of most Americans’ outrage at his big lie that the 2020 election was stolen from him and his role in the January 6th insurrection, but also of the poor showing (and terrifying characteristics) of many of his endorsees in recent Republican primaries The televised hearings by Congress’s select committee investigating the January 6 insurrection are unlikely to improve Trump’s standing with most voters.

Besides, much can happen between now and the next presidential election to alter the odds – not the least, the composition of Congress after the midterm elections, the outcome of the war in Ukraine, and the economy.

It’s true that many Democratic voters are unhappy with Biden — especially many of the young voters who surged into the 2020 election. They had expected Biden to pass more ambitious legislation on a range of issues — slowing climate change, subsidizing childcare and eldercare, lowering the prices of prescription drugs, expanding healthcare, and raising taxes on the rich to pay for all this.  

In some ways, Biden has had the worst of both worlds: The 2020 elections that gave Democrats control over both houses of Congress raised expectations that Biden’s proposals would be enacted, but senate Republicans torpedoed almost all of them (apart from benefits to tide people over during the second COVID wave and a deal on infrastructure). Biden also has had to cope with two Democratic senators – West Virginia’s Joe Manchin and Arizona’s Krysten Sinema — who vote like Republicans. Even if Manchin and Sinema were willing to support Biden’s proposals, they won’t join other senate Democrats in eliminating the filibuster. That means, under current Senate rules, at least 10 Republicans would have to agree with all fifty Democrats to limit debate and move to a vote – a nearly insurmountable obstacle.

An even more basic problem for Biden is that the Democratic Party he knew when he was elected to the Senate fifty years ago from blue-collar Delaware is not the Democratic Party that elected him in 2020. It’s now largely composed of young adults, college-educated voters, and people of color. In the intervening years, many working-class white voters who were once loyal Democrats joined the Republican Party. As their wages stagnated and their jobs grew insecure, the Republican Party channeled their economic frustrations into animus toward immigrants, global trade, Black people and Latinos, LGBTQ people, and “coastal elites” who want to control guns and permit abortions.

These so-called “culture wars” have served to distract such voters from the brute fact that the Republican Party has zero ideas to reverse the economic trends that left the working class behind. The culture wars have also distracted attention from the near-record shares of national income and wealth that have shifted to the top. As well as from the Republican’s role in pushing even more to the top through tax cuts and subsidies, attacks on labor unions, and refusals to support social benefits that have become standard in most other advanced nations (such as paid sick and family leave, universal healthcare, and generous unemployment insurance).

During his 36 years in the Senate, followed by eight as Obama’s vice president, I’m sure Biden became aware of the loss of these working-class voters. And he must have known of the Democrat’s failure to regain their loyalty.

The Obama administration expanded public health insurance, to be sure. But Democratic administrations also embraced global trade and financial deregulation, took a hands-off approach to corporate mergers and growing industrial concentration, bailed out Wall Street, and gave corporations free rein to bash labor unions (reducing the unionized portion of the private-sector workforce during the last half century from a third to 6 percent).

It was a huge error – politically, economically, and, one might even say, morally.

What accounted for this error? I saw it up close: the Democratic Party’s growing dependence on campaign money from big corporations, Wall Street, and wealthy Americans – whose “donations” (bribes) to both parties soared.   

Clinton styled himself a “new Democrat” who would govern from above the old political divides — “triangulate,” in the parlance of his pollster, Dick Morris. In practice, Clinton auctioned off the White House’s Lincoln Bedroom to the highest bidders, made Wall Street’s Robert Rubin his chief economic adviser, advocated and signed the North American Free Trade Act, opened the US to Chinese exports, and cleared the way for Wall Street to gamble.

Obama brought into his administration even more Wall Street alumni and made Larry Summers his chief economic advisor. Obama promptly bailed out the Street when its gambling threatened the entire economy but asked nothing of the banks in return. Millions of Americans lost their homes, jobs, and savings, yet not a single top Wall Street official went to jail.

Small wonder that by 2016, two political outsiders gave dramatic expression to the populist bitterness that had been growing – Bernie Sanders on the left and Donald Trump on the right. At the time, they even spoke the same language – complaining of a “rigged system” and a corrupt political establishment, and promising fundamental change.

Joe Biden saw all this unfold. He came to publicly regret his vote to ease banking rules. He never celebrated the virtue of free markets. He has been far closer to organized labor and more comfortable with non-college working-class voters than either Bill Clinton or Barack Obama. “I am a union man, period,” he has repeatedly said. He’s no free trader, either. Biden proposed relocating supply chains for pharmaceuticals, semiconductors, and medical supplies in the United States, and imposing tax penalties on companies that relocate jobs abroad and credits for those that bring them home. He has kept in place most of the trade restrictions that Trump placed on China.

During the 2020 presidential campaign Biden was billed as a “centrist” seeking bipartisan solutions. But he had big, non-centrist ambitions. Seeking to be a “transformative” president, he openly sought a New Deal-style presidency. Once in office, he proposed the largest social agenda in recent American history. That Biden failed to get most of this agenda passed in his first term was due less to his own inadequacies than to the Democrat’s razor-thin congressional majorities, the aforementioned Manchin and Sinema, and the Party’s own compromised position vis-à-vis the power structure of America.

But Biden’s and the Democrat’s deepest challenge was, and continues to be, voter’s distrust of the system.  

All political and economic systems depend fundamentally on people’s trust that its processes are free from bias and its outcomes are fair.

Trump’s big lie that the 2020 election was stolen from him has contributed to the distrust but is not responsible for it. Only about a third of Americans believe him.  

The real source of distrust is the same force that ushered Trump into the White House in 2016: four decades of near stagnant wages, widening inequality, a shrinking middle class, ever more concentrated wealth at the top, and growing corruption in the form of campaign cash from the wealthy and corporations.

If Democrats retain control of Congress in the upcoming midterm elections (possible but unlikely, given the usual pattern in which the party in control loses it) Biden could still become a transformative president in the last two years of his first term if he focuses like a laser on reversing these trends.

Even if Democrats do not hold onto Congress, Biden could be a moral voice for why the system must be transformed. It’s his best hope for being reelected in 2024.

Robert B. Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies, and writes at robertreich.substack.com. Reich served as Secretary of Labor in the Clinton administration, for which Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written fifteen books, including the best sellers "Aftershock", "The Work of Nations," and"Beyond Outrage," and, his most recent, "The Common Good," which is available in bookstores now. He is also a founding editor of the American Prospect magazine, chairman of Common Cause, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentary, "Inequality For All." He's co-creator of the Netflix original documentary "Saving Capitalism," which is streaming now.

Residents ‘living in the shadow’ of Grenfell Tower on fifth anniversary of fire

Dozens died in block of flats in west London in 2017

Over 70 people died after a fire broke out in Grenfell Tower in west London in 2017. PA.

Neil Murphy

Residents have described what it has been like “living in the shadow” of Grenfell Tower, five years after the blaze that claimed 72 lives.

Members of the community in North Kensington, west London, spoke of how the fire “seems like it was last night”, with the tower a constant reminder of the trauma they have suffered.

The June 2017 disaster left the 67 metre-tall building dilapidated and charred.

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Heaviness 'hangs over' London’s Grenfell community ahead of jubilee celebrations

Authorities took four months to cover the block in a protective wrap with green hearts and the message: “Forever in our hearts.”

Five years on, no decision has been made about the future of the building. But the Grenfell Tower Memorial Commission said a garden was “by far” the most popular idea from a survey of survivors, bereaved relatives and local residents.

Eman Yosry, a resident of Markland House tower block near Grenfell Tower, said the flats are “in front of us all the time”.

In an interview ahead of the anniversary on Tuesday, Ms Yosry spoke about losing many people she knew in the fire, saying: “I feel I can’t describe how sad and how difficult and painful it was.”

Growing tearful, she added: “I don’t know what to say.”

Ms Yosry said: “You can’t get away or forget what happened. It’s there, it’s in front of us all the time.

“Everywhere you go – you see Grenfell Tower. You go to anywhere near the area, you see the tower.”

Nahid Ashby, a resident of the Frinstead House tower block on the Silchester estate near the tower, said: “We’re still living in the shadow.”

Eman Yosry during an interview at the Grenfell Recovery Centre, west London, ahead of the fifth anniversary of the Grenfell Tower fire. PA.

Ms Ashby described what it was like waiting for months for authorities to cover the burnt-out tower.

She said: “A lot of people were saying from the very beginning: ‘Are you going to cover it so we don’t have to look at it?’

“But by the time they covered it, it felt even worse because, I don’t know, they’re just covering it all up because that fire shouldn’t have happened.”

Mohammad Tehrani, 66, who lives in Bramley House next to the tower, said the disaster was always on his mind.

Mr Tehrani, who was at the foot of the tower on the night five years ago, said he saw body bags being carried out of the building and watched debris falling from it.

Showing a video he took of the debris surrounding Bramley House in the morning, Mr Tehrani said he cleared it up as children walked past on the way to school.

The 66-year-old said the ordeal “seems like it was last night” for the community while authorities try to “brush it under the carpet”.

He said: “I mean for us it hasn’t aged.

“It just seems it was last night so five years (on) and they try to ignore, they try to brush it under the carpet.”

Mr Tehrani said he is now able to talk about the disaster without crying but it is still “inside me”.

He also said he still gets flashbacks at night, seeing people “behind the windows begging for their lives”.

“This is something that we’ve seen that we will never forget – no matter what you do, it’s in your mind.

“For four years I used to cry every time you asked me a question, I couldn’t control myself.

“I’m trying my best but it’s inside me still. You can’t help it.”

Mr Tehrani said the way the disaster has cast a long shadow on the lives of children in the community is “so bad”.

He added: “I feel so sorry for my grandchildren, I feel so sorry when I see the young people, because I don’t think they will have a good future because of the things happening.

“They don’t speak but it’s at the back of their mind – if I’m 66 years old and I cannot forget that night, just imagine.

“I mean even my granddaughter lost some friends in her school.

“They don’t say anything but obviously it’s internally affected them – all of them.

“Some of the children, I’ve heard from our community, they don’t even go to the gas fire, they don’t like to see their mother cooking on the gas fire.

“You see it’s so bad.”

Elizabeth Campbell, leader of Kensington and Chelsea Council, said: “On the fifth anniversary of the Grenfell tragedy, and always, our first and last thoughts are with those who lost their lives, their families and their friends.

“The bereaved and survivors continue to show incredible strength, courage, and solidarity, as they search for truth and justice.

“They have set us the challenge of being the best council – something I intend to strive towards."

A representative of the Department for Levelling Up, Housing and Communities said: “The Grenfell Tower tragedy must never be allowed to happen again and our thoughts are with the bereaved families, survivors and residents.”

 

Top Tax Contributors To Pakistan’s Economy – OpEd

Location of Pakistan and Pakistani Rupee coin.

 June 11, 2022  Eurasia Review  

By Humais Sheikh

No country can become a prosperous and welfare state unless it manages all its financial requirements both on development and administrative sides within its own financial resources. 

Deficit in tax collection domain is one of the major problem faced by Pakistan since its inception and because of this the government is forced to borrow loans for virtually everything. As a result, there is less money in the budget to spend on the welfare and wellbeing of citizens. 

There are many factors that led to this deficit in the tax collection in Pakistan. The federal cabinet highlighted the issue of a huge backlog of revenue cases and showed its greater concern relating to revenue collection amounting to trillions of rupees. A low tax base leads to low tax revenue. The Federal Board of Revenue (FBR) after a survey claimed that only 1% of Pakistanis pay taxes. The evaders include many billionaire companies and individuals in the country. To enhance the tax base, Pakistan needs more entities from the corporate sector to file the taxes. Mostly the people from the private sector use means to evade tax payments and as a result the poor people have to suffer. However, in this vicious circle of tax evasion there are still some institutions and organisations that contribute heavily to the national economy through payment of regular taxes thus setting a good precedent for others to follow. 

One of these institutes is the Fauji Foundation. After 1947, proportionate share of the balance fund was transferred to Pakistan. Fund remained with the Government until 1953, when Rs 18.232 Million were transferred to C-in-C. In 1954, Fauji Foundation was founded as a “Charitable Trust” incorporated under “Charitable Endowment Act 1890.”

Fauji Foundation (FF) is rendering welfare to 9.9+ Million individuals, amounting to Rs 10 Billion per annum. It also provides jobs to a large number of civilians (70%), much more than retired service personnel (30%).

Fauji Foundation has contributed significantly to the national cause in the fields of industry, social development, employment opportunities while enhancing the national exchequer by paying considerable taxes. The commercial undertaking is contributing in overall economy of the country. In 2020/21, FF has deposited tax amounting to Rs 150 Billion in national treasury. FF has paid Rs 1 Trillion to the Government over the last five years as taxes and levies. Fauji Foundation is not enjoying any special privileges, and is playing by market rules and operating under relevant regulatory authorities. 

Another organisation which is contributing to national development is Army Welfare Trust – AWT, is a financial and industrial group which seeks to provide stability and progress to the armed forces and the nation. AWT paid Rs 2.54 Billion as taxes during the period from October 2019 to Septemper 2020.

The data reveals some other private entities that pay heavy income taxes include the Oil and Gas Development Company Ltd (OGDCL) which paid Rs17.9 billion. It was followed by the Pakistan State Oil Company Limited (PSO). In the banking sector The United Bank Limited (UBL) paid Rs12 billion, while the Standard Chartered Bank (Pakistan) Ltd, Rs4 billion. If all commercial and business organisations and institutions continue to pay their fair share in the taxes domain, government will be much facilitated in terms of revenue collection to run its economic and financial affairs.

Humais Sheikh is an independent Defence Analyst based in Islamabad. He has completed his Masters in Defence and Strategic Studies from Quaid-I-Azam University, Islamabad.

Pakistan’s Defense Budget In The South Asian Region – OpEd

Military truck carrying intermediate-range ballistic missile of Pakistani army, November 27, 2008 (Courtesy SyedNaqvi90)

 June 11, 2022  Eurasia Review  

By Jawad Ahmed

Montesquieu was a sociologist and political scientist of the eighteen century who believes that geographical location of an area will have implications for its habitants. Pakistan is the country located in the geographical line with having security challenges and a chronic crisis in its neighbour. 

Newly independent countries at the end of World War II had no option but to go under the umbrella of one of the global power to safeguard their national interest. Being a colony of British’s, Pakistan naturally adopted US camp. Soon after independence Pakistan faugh war of 1948 with India and then war of 1965 and 1971. Kashmir remained the bone of contention between bot the neighbours resulted in wars and then ultimately an unstoppable strategic battle between both the countries. 

Russian invasion of Afghanistan and later US “War on Terror” and its attack on Afghanistan once again brought instability in the region. In August 2021, US and NATO forces left Afghanistan yet the country is suffering at the hands of lack of resources and crisis of governance with non-actors like TTP. 

South Asian region is a closely located region with porous border where insurgency travels and incidents of one country directly affects others. In this situation, Pakistan have been looking to get out from the label of security state to a normal state but repeated  incidents of anarchy  and security challenges in region does not allow Pakistan to do so. On Eastern side, Pakistan has India with a chronic Kashmir conflict and a history of wars. On Western side, Pakistan has Afghanistan which is struggling to survive on its own, non-state actors in Afghanistan remained a constant threat for Pakistan. Pakistan is facing attacks from the terrorists operating from the other side of border in its area of erstwhile FATA and Afghanistan. During this scenario, Pakistan Army fenced porous Afghan border through its resources to tackle the issue of cross border infiltration from Afghanistan. 

Gabriel Almond a political scientist has said that the States are arranged in such a paradoxical order that willingly or unwillingly for their survival, they have to interact with each other. Pakistan in this situation is compelled to adopt a strategic outlook while looking into the strategic scenario of the region. Strategic gestures and stereotyping is necessary to deal and to hold a position to defend the national interest. Latest military trainings and equipment, research and experimentation, interaction with the allies and formation of new allies is the need for Pakistan. This is a constant process which requires proper expenditure yet Pakistan Armed forces are managing this within their limited resources. 

Pakistan have been a weak economy over the recent years, corona pandemic, international conflicts i.e Ukraine war, global inflation and internal political instability has made it difficult for Pakistan to meet the requirement. Pakistan Armed forces has been successfully fulfilling their responsibilities in defending the country and dealing the pandemics within their limited resources.

On the other hand, India has a defence budget of $ 70 billion and Pakistan carries a defence budget of $ 11 billion, this depicts the huge difference in the amount of budget which India spends as compared to Pakistan.  It is a fact that when it comes on spending on an individual soldier, India spends four times more as compared to Pakistan. On a single soldier, Pakistan spends around $ 13 thousand while India spends $ 42 thousand. India is third on annual defence expenditure in the World and this defense budget of India is seven times more than Pakistan. It has also been a challenge for Pakistan that India remained the second biggest importer of weapons between 2016-20. 

Despite of constant increase in Indian budget and the constant challenges of the threats, Pakistan Army has not increased its budget in the last two years. Strategic needs of country were fulfilled through the available resources. Despite of economic difficulties, Armed forces of Pakistan are continuing their operational capabilities against terrorism and adoring themselves with the modern strategic gadgets from the available resources.

Jawad Ahmed is an Islamabad based researcher with having interest in Politics, Bilateralism and Strategic Studies. Can be reached at Jawwadahmedikhlaq89@gmail.com

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