Reduce military expenditure

The Government delegation commenced negotiations with the International Monetary Fund (IMF) last week which seeks to stabilise the country’s ailing economy as protests raged all over the country against the ruling regime. If these negotiations result in an agreement, it will be the 17th IMF program Sri Lanka has entered into since its independence in 1948.

The IMF and other international assistance programs will come with certain reasonable demands to the Government in order to get its financial house in order. They would obviously expect restructured debt to be sustainable. In order to do so the Government will have to show considerable cuts in expenditure, greater fiscal discipline and transparency regarding corruption.

Unlike in the past when the IMF had been projected as a tool of capitalism that envisioned open economies and limited State sector participation in the economy, even in socially significant sectors, the organisation has evolved with time to appreciate the State sector investments in healthcare, education and good governance. Though it is reasonable to expect that any lending agency would not wish to see the money provided to a government be wasted, no longer do these international agencies demand governments to curb social welfare programs as a first resort.

As Sri Lanka embarks on this difficult economic journey it must take stock of some of its State sector expenditure. Key among them should be the expenditure on defence. Sri Lanka which ranks at 58 according to the size of its population size has the 17th largest military in the world. In the 2022 budget, the highest allocation was made to the Ministry of Defence. Even while a pandemic was raging in the country allocations for healthcare were reduced and expenditure on education has remained stagnant for years. The direct military allocations for the Sri Lanka Army, Navy and the Air Force, inclusive of both recurrent and capital expenditure, was a staggering Rs. 308 billion, 12.3% of the total estimated Government expenditure of Rs. 2.5 trillion. 

As a percentage of GDP, Sri Lanka spends nearly 2% on military expenses, an extraordinarily high amount for a country that does not face an existential security threat. In addition, unlike other countries, Sri Lanka does not have a military industrial sector that produces weapons or ammunition, either for itself or for export. Therefore, much of the capital expenditure incurred by the military is primarily for imports that hardly create any economic activity within the country other than for commissions for a selected few.

Even 13 years after the end of the separatist conflict the military has not significantly reduced its numbers, nor restructured itself to suit the different challenges and realities of a post-conflict, democratic country. The tri forces and paramilitary groups such as the home guards total more than 350,000 according to publicly available data. It is because of these bloated numbers that the military has ventured into areas that curtail competition and healthy economic activity. 

From agriculture, construction, retail businesses to civil aviation the military today has expanded its role. Other than the trickledown effect of salaries, the military hardly contributes to the economy. On the contrary, by encroaching into economic activities that would otherwise create private sector jobs it stifles competition and growth.

In addition, there are numerous examples of colossal waste and allegations of corruption regarding the money allocated to the military. The massive defence ministry complex partially constructed at Akuregoda, the selling of the army headquarters’ land at the heart of Colombo, and corruption, numerous allegations during weapons procurement are examples. It is necessary to address the issue of military expenditure in addition to the issue of unprecedented militarisation under the presidency of Gotabaya Rajapaksa. As Sri Lanka faces its worst economic crisis in history, it is essential not only to drastically curtail military spending but evaluate and redefine its role to suit a democratic country which is not at war. This is the opportune moment for this long delayed reform.