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Pakistan


The squeeze on West Pakistan's investment came from two sources: sharp increase in defence spending and the conscious effort to increase development outlays and foreign aid allocations for East Pakistan. .
             Real defence spending hardly risen little over 3 percent per annum in the five years before the 1965 war with India, substantially less than the rate of growth of the economy. The availability of US military assistance probably continued to moderate the growth in defence spending. But it is significant that Ayub Khan, a former C-in-C of the army, kept the size of the army under strict control, even though India's defence expenditure 39 was rising rapidly after its confrontation with China in 1962. Following the war with India in 1965, defence allocations were given high priority and phasing out of US military assistance after 1965 put additional burden on domestic resources. Real defence expenditure almost doubled between 1960-65 and 1965-70. This took its toll on development. A serious conflict between defence and development, which had characterized the first half of the 1950s, re-emerged after 1965. The Third Plan (1965-70) had targeted a sharp expansion in public development spending while reducing defence spending as a proportion of GDP.
             In fact development expenditure remained at 7.1% of GDP while defence expenditure rose from 2.8% of GDP in 1960-65 to 4% in 1965-70.
             Defence vs. Growth under Zulfikar Ali Bhutto (1971-77).
             1972-73 1973-74 1974-75 1975-76 1976-77.
             Defence expenditure 2.7.
             (3.8) 4.8.
             (5.4) 6.3.
             (5.6) 8.
             (5.6) 8.
             (5.6).
             Development.
             Expenditure 3.9.
             (5.7) 36.
             (7.3) 44.
             (10.2) 14.9.
             (11.2) 8.82.
             (9.0).
             Investment 0.8.
             (12.9) 5.9.
             (12.4) 5.5.
             (12.7) 20.7.
             (14.6) .
             (13.7).
             Growth 1.7% 3.4% 4.1% 5.3% 4.0%.
             The high and rising burden of defence expenditure was a root cause of the fiscal imbalance as Pakistan was trying to recover from the shocks of difficult political and military conditions after the 1971 war with India. Defence expenditure in 1975-6 and 1976-7 average at Rs.


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