ISLAMABAD – Pakistan announced federal budget of Rs18.77 trillion for the upcoming fiscal year in a major shift in spending priorities as the government increases defence allocation while restricting development expenditure and raising ambitious tax targets under IMF constraints.
Finance Minister Muhammad Aurangzeb presented the budget in parliament, confirming that defence spending will rise to 3 trillion rupees, an increase of around 18% compared to the previous year. He said the higher allocation reflects the need to strengthen national security amid regional uncertainty.
Pakistan is facing a lot of security challenges, as the country attempts to maintain what officials describe as a minimum credible deterrence across multiple fronts. Despite limited resources, this budget is stretched across a wide security spectrum—including territorial defence, counter-terrorism operations, and internal security management—leaving little room for expansion or modernization at scale.
Unlike single-front defence model, Pakistan’s security challenges span more than one direction. Along its western border, the country continues to face militant activity, cross-border infiltration, and entrenched armed networks, while the eastern frontier remains a conventional security concern.
This dual-pressure environment means defence spending is not concentrated on one type of threat but must simultaneously support border defence, counter-insurgency, and internal stability operations.
The imbalance in regional military spending remains stark. Pakistan’s defence budget is estimated at roughly one-eighth of its primary regional adversary, underscoring what analysts describe as a structural capability gap rather than an active arms race escalation.
In terms of equipment acquisition, the disparity is even more visible. Reports indicate that while India allocates around $21 billion for new defence systems and hardware, Pakistan has only about $2.34 billion available for new inductions, significantly limiting modernization capacity and procurement speed.
Despite financial limitations, Pakistan is responsible for securing a 3,300-kilometre-long border, which remains both sensitive and operationally demanding due to its terrain and security environment.
Supporters of the current defence posture argue that, given the scale of threats and the size of the frontier, Pakistan manages to maintain a relatively low cost-per-kilometre security model compared to many frontline states, even under tight fiscal conditions.
Proponents of Pakistan’s defence spending framework argue that the current allocation is not aimed at escalation but at maintaining essential deterrence in the face of a widening gap in conventional capabilities and ongoing internal security demands.
With limited funding, competing threat environments, and a significant regional disparity in defence investment, Pakistan’s military budget reflects a strategy focused on balancing deterrence, internal stability, and border security under financial constraint rather than pursuing parity in force size or spending power.
In contrast, federal development spending has been reduced to 1 trillion rupees, showing sharp tightening in growth-oriented expenditure. The cut comes as part of broader fiscal adjustments aimed at maintaining stability under Pakistan’s ongoing IMF programme.
The government has set tax revenue target of 15.26 trillion rupees, representing an 8.2% increase over last year, despite previous shortfalls in collection by the Federal Board of Revenue. A major portion of revenue is expected to come from taxes and levies, including an estimated 20.60 trillion rupees from petroleum levies and related charges.
The budget projects federal deficit of 7.02 trillion rupees and an overall fiscal deficit of 5.23 trillion rupees, or 3.6% of GDP, assuming provinces deliver a combined surplus of 1.79 trillion rupees. These figures underline the tight fiscal conditions facing the government as debt servicing, defence spending, and IMF commitments dominate expenditure planning.
Pakistan is targeting 4% economic growth and 8.2% inflation for the coming year, compared with 3.7% growth expected in the current fiscal year and average inflation of 6.7% between July and May. However, rising global oil prices, driven by geopolitical tensions linked to the U.S.–Israel–Iran conflict, have already pushed inflation back into double digits after a brief period of stabilization.
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