Finance Minister Shaukat Aziz highlighted a 31 percent increase in development spending to 160 billion rupees (2.7 billion dollars) when he presented the budget Saturday, making it equal to direct defence spending for the first time.

"Who will be the beneficiary of this allocation? It cannot be the poor of this country, unless this is supplemented with meaningful reforms," economist Karamat Ali, who heads the Pakistan Institute of Labour Research (PILER), told

By Islamabad's figures, 31 percent of its 145 million people are living in poverty, earning less than two dollars a day.

Economist Shahid Hasan Siddiqui called Prime Minister Zafarullah Jamali's maiden 805 billion rupee (13.8 billion dollar) budget "routine" and lashed his government for failing to take advantage of benefits won by Pakistan since late 2001 for supporting the ouster of Afghanistan's Taliban regime.

"The finance minister had a rare opportunity, which he missed, to present a welfare budget aimed at reducing poverty and unemployment due to favourable factors in post-September 11 era," Siddiqui said.

Among Pakistan's slew of war-on-terrorism rewards was the rescheduling of 12.5 billion dollars of debt, almost one third of its total 38.5 billion dollar debt at the time.

The allocation of 160 billion rupees for direct defence needs came under fire, even though it represented a freeze on the defence budget.

"Senior serving officers in the armed services themselves believe that the defence budget could have been cut by at least 20 percent...but it was not done," Ali said.

Aziz however found himself defending the freeze in defence spending during a press conference Sunday.

"Last year the defence budget was increased from 146 billion rupeesbillion dollars) to 2.78 billion dollars as India had deployed one million soliders on our borders," Aziz said.

"This year there is no change in defence budget as it is sufficient."

The other customary budget drain, debt servicing, was reduced in the new year to June 2004 budget to 250 billion rupees, or 36 percent of GDP.

"It still takes away the largest chunk of the hard-earned resources of the people," Ali said.

Aziz countered the criticism by saying the reduction in debt repayments gave the country more funds for other purposes.

"The reduction in debt servicing from 66 percent of total revenue three years ago to 36 percent has provided us with a fiscal space which is being diverted to development.

"We will not leave the nation in the net of loans and have done away with begging bowl culture," Aziz insisted.

The budget was free of new taxes, but former Punjab province tax minister Zia Haider Rizvi said there was "no incentive for the industrialists or business class."

Not spared from criticism were opposition MPs. They tried to drown out Aziz' budget speech in parliament with slow chants and desk thumping, as part of their campaign to make President Pervez Musharraf surrender his self-declared rule.

"The greatest challenge...is to attract local as well as foreign direct investment, but the protest during the budget speech showed an acute political confrontation, which is enough to discourage both of them," Siddiqui said.

WAR.WIRE