On Tuesday, Pakistan announced an increase in defence budget by 20 per cent, setting aside PKR 2,550 billion (roughly USD 9 billion) in the fiscal year 2025-26. This was announced when the finance minister, Muhammad Aurangzeb, presented the Federal budget, amounting to PKR 17,573 billion, in the National Assembly. The significant increase in defence expenditure occurs at a time when tension between India and it has escalated due to cross-border aggression in the recent past.
Presenting the budget at a historic time when the country has displayed unity and resolve, Aurangzeb said that the budget seeks to improve the fiscal position by enhancing revenues, containing expenditures, and promoting growth. The tension between the two nuclear-armed neighbours continued for four days before it was resolved on May 10, following high-level military negotiations between the two sides.
The finance minister, although he acknowledged the higher allocation to the defence sector, did not provide a sector-wise breakdown as has been the long-held tradition to keep defence spending shrouded in mystery and beyond the purview of the parliament. Pakistan had previously (in the preceding year) allocated PKR 2,122 billion to defence, which was approximately 15 percent more than PKR 1,804 billion allocated in the previous fiscal year.
The defence expenditure is still second in the Pakistani annual budget after debt servicing. In the current year, the amount of PKR 8,207 billion has been allocated to the payment of interest and repayment of debt. Other significant allocations are PKR 971 billion to civil administration, PKR 1,186 billion to subsidies, PKR 1,055 billion to pensions, and PKR 1,000 billion to the Public Sector Development Programme.
Aurangzeb has set a GDP growth rate of 4.2 percent, which is far higher than the 2.7 percent recorded this fiscal year. The government further targets to restrain inflation at 7.5 percent and restrict the fiscal deficit to 3.9 percent, and the target of the tax revenue of PKR 14,131 billion has been set on the Federal Board of Revenue.
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