Pakistani Premier Yousuf Raza Gilani said the government would freeze defense spending in the upcoming budget, state media reported Tuesday, as the country tries to tackle growing economic problems. Nuclear-armed Pakistan, spent 275 billion rupees (4.1 billion dollars) on defence during the current fiscal year ending on June 30, up from 250 billion rupees in the previous year. “The government has decided to freeze the allocation for defense in the next national budget as a measure of Pakistan's tangible display to seek peace with neighbors,” Gilani told parliament late Monday according to state media. Gilani said that in effect the defense budget would be “reduced in the context of inflation and rupee-dollar parity”, the official Associated Press of Pakistan news agency reported. Without actually naming neighboring nuclear rival India, he said that he expected a “reciprocal gesture from our neighbor for the sake of peace and prosperity of the region”. Gilani added that “the defense ministry and the chief of army staff have fully endorsed the revised format of the defense services budget estimates.” The state bank raised interest rates 1.5 points to 12 percent in May in a bid to curb soaring inflation. The bank said inflation was set to hit 11 percent this year, double the target of 6.5 percent. Meanwhile, the country's economic growth has slowed to 5.8 percent because of poor farm output and sluggish industrial expansion, the government said Tuesday. Finance Minister Naveed Qamar said projections indicated that the economy expanded 5.8 percent in the current fiscal year, which ends June 30, compared to 6.8 percent the year before. After years of rapid growth, Pakistan's economy is slowing amid problems from double-digit inflation to yawning budget and trade deficits and political uncertainty. The World Bank has warned that Pakistan could tip into crisis unless the government acts quickly address the problems . Qamar released the data a day before presenting the coming year's budget, which is expected to include spending cuts and tax hikes. Officials have also said they will try to alleviate the impact of skyrocketing food prices on Pakistan's poor. Pakistan has witnessed strong growth in recent years, but global economic issues coupled with domestic political turmoil have hit hard this year. Anger is mounting among the country's 160 million people over shortages of food and other commodities, coupled with frequent power outages, factors that contributed to the defeat of Musharraf's backers in elections in February.
