Sunday, June 5 2005 19:50 Hrs (IST) - World Time -

Islamabad: Pakistan is expected to raise its Defence budget tomorrow (Jun 6, 2005) to meet its plans to buy 75 new and old F-16 fighter aircraft from United States for an estimated price of around three billion dollars.

As its pre-budget Economic Survey 2004-05 released in Islamabad yesterday projected a healthy 8.4 per cent growth rate, indications are that Pakistan would increase Defence budget substantially this year in view of the proposed purchases. Last year, Pakistan had increased its Defence budget from $2.8 billion to $3.4 billion.

Salman Shah, Prime Minister Shaukat Aziz's economic advisor, said Pakistan need not pay the money at once for the F-16s. Three billion needed for the F-16s could be paid over the next several years, so that there would be no one-time spike, he told reporters while releasing the survey.

The budget would be presented in the National Assembly tomorrow.

On overall economic situation, however, the survey presented a mixed picture. While the economy grew at a rate of 8.4 per cent which puts it on par with Singapore and behind China's 9.3 per cent, it is weighed down by adverse impact of inflation which peaked to 11.1 per cent in April this year.

"Sustainability of growth rate and reduction in the rate of inflation are two major challenges for Government," Aziz told reporters while unveiling highlights of the survey.

The alarming rise of inflation, which unofficial estimates put at around 15 per cent, has an adverse impact on the poor and vulnerable segments of the society and hurt the purchasing power of the low-income groups.