THE IMF’s latest projections outline Pakistan’s fiscal priorities over the coming years. Under the second review of the $7 billion Extended Fund Facility, the international lender expects PSDP to decline from 0.7 percent of GDP in the current fiscal year to 0.6 per cent next year, remaining at that level through FY30. In absolute terms, PSDP spending is estimated at Rs873 billion this year, hovering around Rs885 billion in FY27 before gradually rising to about Rs1.2 trillion by FY30. Defense spending is projected to rise from around 2 per cent of GDP this year and stay at that level through FY30, increasing in nominal terms from about Rs2.57 trillion this year to nearly Rs4 trillion by the end of the decade.
These projections underline a reality Pakistan cannot ignore. A sustained increase in defence expenditure is imperative in view of India’s belligerent posture. Despite the defeat it faced in the May conflict, India’s leadership has continued to issue aggressive and provocative statements against Pakistan. With Indian defence spending vastly exceeding Pakistan’s, it is also a reality that we cannot enter an arms race. What we must do and has done effectively is make smart, targeted choices. The performance of our armed forces in the May conflict demonstrated that professionalism, preparedness and strategic clarity can allow a force to outsmart a far larger adversary. On matters of national security, there can be no compromise. However, national security is not safeguarded by military strength alone. A shrinking PSDP poses serious long-term risks. Development spending is not a luxury; it is the backbone of sustainable economic and social stability. We need major investments in dam construction to address water security, in education to build human capital and in health to improve productivity and resilience. Connectivity and infrastructure projects are equally vital. With fiscal space constrained, the state alone cannot shoulder the burden. Greater involvement of the private sector through public-private partnerships, innovative financing and regulatory reform is essential to put the PSDP back on an upward trajectory. Reviving economic activity, attracting investment into productive sectors and achieving higher, sustainable growth will expand the resource envelope. That, in turn, will also provide additional cushion to spend more on defense. Security and development must move forward together; neglecting either would be a strategic mistake the country can ill afford.
